Kansai Nerolac Paints (500165) Q4 16/17 earnings summary

Executive summary

• FY17 revenue grew 7.2% YoY and PBDIT rose 26%; reported PAT declined as FY16 included a large one-time land-sale gain.

• Industrial coatings leadership and product innovation supported market-share gains; capacity and R&D expansion continued across three new plant projects and a Navi Mumbai R&D centre.

Financial highlights

• Standalone gross sales and other operating income were ₹4,936.05 crore, up 7.2% YoY; net sales and other operating income reached ₹4,531.05 crore versus ₹4,245.52 crore.

• PBDIT was ₹730.69 crore versus ₹579.98 crore, up 26%; PBT was ₹759.42 crore versus ₹539.61 crore excluding the prior-year exceptional land-sale profit, a reported 40.7% increase on that basis.

• PAT was ₹505.94 crore versus ₹898.85 crore; FY16 included a ₹535.34 crore exceptional profit on sale of Chennai land.

• Other income increased to ₹98.22 crore from ₹27.35 crore, mainly reflecting investment of surplus funds following the prior-year Chennai land sale.

• Consolidated revenue from operations was ₹4,584.53 crore versus ₹4,273.86 crore; consolidated PAT was ₹505.38 crore versus ₹902.01 crore.

Outlook and guidance

• Three greenfield plants in Gujarat, Punjab and Andhra Pradesh were under development; the Visakhapatnam facility is planned for 60,000 KL annual capacity, expandable in phases, at an estimated ₹304 crore cost.

• Construction at Saykha, Gujarat, and Goindwal Sahib, Punjab, was progressing to schedule; a global R&D centre at Vashi, Navi Mumbai, was also under construction.

• GST readiness work continued; management expected inflationary input-cost pressure to accelerate in FY18 and currency volatility to remain challenging.

• Improving consumer demand after remonetisation, infrastructure investment and low housing-loan rates were identified as potential demand supports; a below-par monsoon and new competitors were risks.