Tale of two paint companies: Asian Paints versus Kansai Nerolac
Asian Paints on Tuesday reported an 18.7 percent year-on-year (YoY) increase in revenue for the January-March period, exceeding Street estimates, boosted by better-than-expected growth in sales volumes. On the same day, Kansai Nerolac Paints reported a revenue growth of around 5 percent for the fourth quarter ended March.
Asian Paints on Tuesday reported an 18.7 percent year-on-year (YoY) increase in revenue for the January-March period, exceeding Street estimates, boosted by better-than-expected growth in sales volumes. However, an exceptional loss of Rs 115 crore also hit the profit growth for the quarter.
On the same day, Kansai Nerolac Paints reported a revenue growth of around 5 percent for the fourth quarter ended March 2022.
The company posted a decline of 84 percent in its consolidated net profit at Rs 19.17 crore and is the worst impacted by the rising cost of raw materials. It also saw its gross margin contract over 660 basis points YoY and over 300 basis points on a sequential basis.
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| Asian Paints | Nerolac Paints | |
| Revenue | 18.70% | 5.30% |
| Ebitda | 9.50% | 60.70% |
| Ebitda Margin | 18.30% | 5.50% |
| Gross Margin | 200 Bps | 330 Bps |
| Valuation | 69x | 31x |
Over 80 percent of the Asian Paints’ revenue comes in from decorative paints, whereas for Kansai Nerolac that number is sub 60 percent. A larger share of industrial paints means that prices are contracted so they are not completely passable in terms of raw material price hikes.
In the last one year Asian Paints has increased by about 21 percent in terms of share price whereas Kansai Nerolac has declined by 22 percent.
Valuation wise Asian Paints is valued at almost 69 times its FY23 earnings while Kansai Nerolac is close to 31 times.
First Published: May 11, 2022 3:12 PM IST
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