Major paint stocks have rallied between 10–40% in the previous month as a result of a decline in crude oil and other raw materials.
Kansai Nerolac paints and Asian paints have jumped 39.35% and 22.19% in the last month. In the same time period, Berger Paints, Indigo Paints, and Akzo Nobel have gained 10.57%, 15.87%, and 3.87%, respectively.
Between April and May, paint companies on average have lost nearly 20% of their value and some stocks have hit 52-week lows due to the rise in crude prices. In the March quarter, the gross margins of paint companies were affected due to a rise in the cost of production, and companies have taken multiple price hikes.
However, crude prices have dropped considerably and are now trading below $100, and a rebound in industry demand led by the automotive sector has helped paint producers' profitability in the first quarter.
Shares of Kansai Nerolac Paints have zoomed 7.21% in Monday's trade and 10.43% in yesterday's trade after the company's profit jumped more than 36 per cent year on year.
For the quarter ending June, the company reported a consolidated net profit of ₹152.05 crore, up 36.5% year on year, compared to a profit of ₹111.38 crore in the same period last year.
Kansai Nerolac's revenue came in at ₹2,051.37 crore, jumping 46 per cent YoY over ₹1,402.76 crore in the April-June quarter last year. EBIDTA was at Rs. 211.91 crores, a growth of 42.41 % over the same quarter of the previous year.
As per Trendlyne, the company's operating revenue and net profit in the June quarter were the highest in the industry.
At 02:00 pm (IST), the scrip traded at ₹514.15 around 1.21 per cent above its previous close of ₹508.30 with a daily volume of 3.1M in both NSE and BSE.
Currently, the stock is trading 44.37% above its 52-week high of Rs. 675. In the last month, the stock rallied by 39.35%, and in the last week, it was up by 29.85% in the last week.
| Consolidated Financials ( ₹in Cr) | Asian Paints | Kansai Nerolac Paints | ||
| Q1FY23 | Q1FY22 | Q1FY23 | Q1FY22 | |
| Total Revenue | 8,606.94 | 5,585.36 | 2,051.37 | 1,402.76 |
| Other Income | 98.97 | 89.61 | 4.83 | 9.94 |
| Total Income | 8,705.91 | 5,674.97 | 2,056.20 | 1,412.70 |
| Expenses | 7,050.99 | 4,671.80 | 1,796.33 | 1,212.24 |
| EBITDA | 1,347.85 | 712.97 | 211.91 | 148.80 |
| PBDT | 1,601.96 | 981.69 | 251.38 | 193.80 |
| Profit Before Tax | 1,393.86 | 781.10 | 208.25 | 152.08 |
| Tax | 370.59 | 204.28 | 56.20 | 40.70 |
| Profit After Tax | 1,023.27 | 576.82 | 152.05 | 111.38 |
| Basic EPS (Rs) Qtr | 10.60 | 5.93 | 2.90 | 2.12 |
| EBIT Margin (%) | 15.66 | 12.76 | 10.33 | 10.61 |
| Net Margin (%) | 11.75 | 10.16 | 7.39 | 7.88 |
Similarly, Asian paints delivered strong numbers for Q1FY23 and beat analyst expectations. The company's revenue was up by 54.09 per cent to ₹8,606.94 crore compared with ₹5,585.36 crore in the same quarter last year. The Consolidated net profit increased by 77.39% year on year (YoY) to ₹1,023.27 crore in the June quarter, compared to ₹576.82 crore in the same quarter last year.
In Q1FY23, the operating profit increased 88.952%, from ₹712.97 crore to ₹1,347.85 crore. EBITDA margin for the June quarter stood at 18.08%, up by 1.72% YoY.
Profit before exceptional items and tax surged 77.39 per cent YoY to ₹1,393.86 crore from ₹781.10 crore.
Further, Asian paints have a strong return on equity of 24.03% and a ROCE of 30.60% (5-year average) respectively. It has a price-to-earnings ratio of (93.47x) compared to the peer average of (93.15x).
"The domestic decorative business experienced good consumer demand and recorded strong revenue growth for the quarter. The volume growth registered in the quarter was one of the highest in the last six quarters, it said, adding that the business also registered "robust 4-year compounded growth in volume and value terms," said Asian Paints.
Meanwhile, brokerage firms remained divided on Asian Paints' post-June quarter numbers.
Centrum Broking maintained a 'buy' call on the stock with a target price of ₹3,707, implying 69.7 times FY24E earnings per share (EPS).
Domestic brokerage Prabhudas Lilladher also maintained a 'buy' call on the stock while raising the target price to ₹3,363 from ₹3,018.
On the other hand, brokerage firm Motilal Oswal Financial Services maintained a "neutral" call on the stock with a target price of ₹3,170.
HDFC Securities has a 'sell' call on the stock but it raised the target price to ₹2,700/share from ₹2,600/share.
Shares of Asian Paints closed at ₹3,396.30 (up 2.16%) on the BSE in Tuesday's trade. Over the last one week, the stock delivered a return of 9.01 per cent and a return of 22.19 per cent in the last one month. Over the last 3 years, the market price of the stock has zoomed by 119.39 per cent and 195.79% in the last 5 years.
Other Paint firms have yet to release their June quarter results.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
