Home Investment Memo: KANSAINER

Investment Memo: KANSAINER

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Our Rating: HOLD

Mehabe score: 6
G Factor: 4
Piotski Score: 6
The stock has a rating HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 4 and Piotski score of 6.

Description

Having started its operations in 1920 as Gahagan Paints & Varnish in Mumbai, Kansai Nerolac Paints is principally engaged in the manufacturing of Paints and is a market leader in Industrial coatings. #

Main Points

Leading player in domestic Industrial paint industry
KNPL is a leader in Industrial coatings. Leveraging its position as priority supplier across various automotive OEMs and ancillaries, the company now has substantial presence in Performance coatings & Powder coating.
It has continued to venture into newer areas of Wood coating, Adhesives, Transportation coatings, Coil & Rebar coatings ,Super durable powders, Construction chemicals.Site: KANSAINERMain Symbol: KANSAINER

Price Chart

Market Cap: Rs 33,734 cr Price: 626.0 Trading pe: 63.7x
Book-value: 75.2/share Div yield: 0.52 % Earning yield: 2.16%
Face-value: 1.00/share 52week high: 680.00 52week low: 416.15

Technical Analysis

  • Stock trades at 626.0, above its 50dma 593.81. It also trades above its 200dma 562.31. The stock remains bullish on techicals
  • The 52 week high is at 680.00 and the 52week low is at 416.15

Price Chart

P/E Chart

Sales and Margin

Strengths

– is almost debt free.
– has been maintaining a healthy dividend payout of 38.98%

Weakness

– Stock is trading at 8.32 times its book value
-The company has delivered a poor sales growth of 6.14% over past five years.
– has a low return on equity of 13.96% for last 3 years.

Competition

– The industry trades at a mean P/E of 96.0x. Hardcast.& Waud trades at the industry’s max P/E of 1795.0x. KANSAINER trades at a P/E of 63.7x
– Industry’s mean G-Factor is 4.0 while the mean Piotski score is 8.0. KANSAINER has a G-Factor of 4 and Piotski scoreof 6.
– Average 1 month return for industry is 3.8%. The max 1- month return was given by Hardcast.& Waud: a return of 16.56 %

Quarterly Results

  • Sales for period ended Jun 2021 is Rs 1403.0 cr compared to Rs 639.0 cr for period ended Jun 2020, a rise of 119.6%
  • Operating Profits reported at Rs 191.0 cr for period ended Jun 2021 vis-vis 77.0 for period ended Jun 2020 .
  • Operating Margins expanded 156.4 bps for period ended Jun 2021 vis-vis Jun 2020 .
  • The EPS for Jun 2021 was Rs 2.12 compared to Rs 2.31 for previous quarter ended Mar 2021 and Rs 0.62 for Jun 2020

Profit & Loss Statement

Profit&Loss Comments

  • Company reported sales of Rs 5838.0 cr for period ended TTM vis-vis sales of Rs 5074.0 cr for the period ended Mar 2021, a healthy growth of 13.1%. The 3 year sales cagr stood at 2.5%.
  • Net Profit reported at Rs 610.0 cr for period ended TTM vis-vis sales of Rs 530.0 cr for the period ended Mar 2021, rising 13.1%.
  • Company recorded a healthy Net Profit CAGR of 10.4% over the last 3 years

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

  • CashFlow from operating activities was positive.
  • CashFlow from operating activities: Rs 646.0 cr for period ended Mar 2021 vis-vis Rs 595.0 cr for period ended Mar 2020

Sales Growth

Profit Growth Statement

Profit Growth Statement

Stock Price CAGR

Return of Equity

General Comments

– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 14.0% compared to 14.0% over the last 3 Years.
– The stock has given a return of 49% on a 1 Year basis vis-vis a return of 10% over the last 3 Years.
– The compounded sales growth on a TTM bassis is -4% vis-vis a compounded sales growth of 3% over the last 3 Years.
– The compounded profit growth on a TTM basis is 2% vis-vis a compounded profit growth of 1% over the last 3 Years.

Ratios

Shareholding Pattern

– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 3.72% vis-vis 3.73% for Mar 2021
– Public shareholding has remained largely constant. The Jun 2021 public holding stood at 9.71% vis-vis 8.42% for Mar 2021

Conclusion

– is almost debt free.
– has been maintaining a healthy dividend payout of 38.98% – Stock is trading at 8.32 times its book value
-The company has delivered a poor sales growth of 6.14% over past five years.
– has a low return on equity of 13.96% for last 3 years.

  • The business fundamentals of the stock remain stable. Stronger near term results will build interest in the stock. We suggest to wait for a upturn in business performance.
  • Technically, the stock remains above its 50 DMA 593.81 and is trading at 626.0, thus bullish price action wise.
  • Thus, overall we retain a HOLD on the stock.

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