Kansai Nerolac Paints (500165) Q1 24/25 earnings summary

Executive summary

• Q1 FY2025 saw a 1% year-over-year revenue decline, but gross margin expanded by 170 bps and profit before tax rose 6.2% year-over-year, driven by operational efficiencies and premiumization.

• Automotive coatings demand remained strong, especially in two-wheelers and passenger vehicles, while decorative demand was muted due to heatwave, elections, and labor shortages.

• New product launches and premiumization drove growth in both decorative and industrial segments; premium product saliency increased.

• Subsidiaries showed mixed performance: Bangladesh grew, while Nepal and Sri Lanka faced market stress.

• Unaudited standalone and consolidated financial results for the quarter ended 30 June 2024 were approved, with statutory auditors expressing an unqualified review opinion.

Financial highlights

• Standalone revenue from operations declined 1.0% year-over-year to ₹2,050.35 crore; consolidated revenue down 1.1% to ₹2,133.06 crore.

• Standalone PBT before exceptional items rose 6.2% to ₹323.41 crore; consolidated PBT up to ₹308.09 crore.

• Standalone EBITDA grew 0.2% to ₹334.4 crore; consolidated PBDIT down 0.6% to ₹3,296 million.

• Standalone PAT rose to ₹7,438 million (including exceptional item); consolidated PAT at ₹7,340 million.

• Gross margin improved by 1.7 percentage points year-over-year, attributed to premiumization and cost-saving initiatives.

Outlook and guidance

• Decorative demand is expected to improve with a favorable monsoon and post-election environment, while infrastructure, auto, and real estate growth are anticipated to boost paint demand.

• High single-digit volume growth is possible for the year, with better performance anticipated in the second half.

• Performance coating (non-auto industrial) outlook is strong, supported by infrastructure growth and new project pipeline.