Kansai Nerolac shares drop on poor demand outlook for Decorative business

55 percent of the company's overall revenue comes from the decorative business while industrial and auto contribute the rest.

For the September quarter, Kansai Nerolac reported a 19 percent year-on-year revenue growth led by a recovery in demand from the auto sector. Operating profit or EBITDA increased in excess of 20 percent while margin expanded 30 basis points.

Gross margin for the quarter remained flat from last year.

The company is currently in wait-and-watch mode on whether those customers who deferred painting their homes ahead of Diwali due to the extended monsoons, return to the market or not. However, Jain is optimistic of the growth momentum from the automotive business to continue.

Although raw material prices may have cooled off, Kansai Nerolac expects the benefits from the same to reflect only in the March quarter.

While the management does not want to increase prices further in the decorative segment, it has taken some price hikes in the auto and industrial business and is in the works for undertaking further hikes. The company has a market share of over 50 percent in the industrial and auto segment.

Expect margin to improve in the industrial segment

Looking at increasing market share by more than 15 percent in the premium segment

Demand outlook for the decorative business is better in Q4