Paint stocks in deep red hue

Kansai Nerolac hit a new 52-week low today at Rs.356.80 and is currently the top loser on the BSE. And Asian Paints is also painted red – it went down over 6% to Rs.1128. Both these paint companies are down on account of poor show for Q2. On the other hand, Berger Paint is to declare its numbers on 1^st Nov but based on the performance of its two listed peers, it is down 7% today at Rs.260.55. Shalimar Paints is down 6% at Rs.85.85.

Kansai Nerolac, for Q2FY19, on a 11% (YoY) rise in revenue at Rs.1294 crore, posted a 16% drop in net profit at Rs.122 crore. EBITDA was down 12% at Rs.195 crore.  Its raw material cost, which uses a derivative of crude oil, was up 25% (YoY).

The company has stated, “During the quarter demand was dampened. Factors like GST rate changes in July leading to destocking by dealers, lingering monsoons over many parts of India and a delayed festival season affected demand for both Decorative and Industrial customers. Despite these conditions the company has had good growth. As was being seen in earlier quarters, uncertainty on the currency front and crude oil prices was more pronounced this quarter as well. This resulted in significant increase in input costs which impacted the bottom-line. KNPL has announced price increase in Decorative from lst October and has taken price increases in Industrial as well, effect of which will be seen in subsequent quarters. Industrial customers are being approached for further price increase to compensate for high inflation. The company expects the growth momentum to be good in Decorative but subdued for Industrial in the near future. It is hoped that the rupee and crude oil will stabilize at the current levels. Any adverse change will put further pressure on margins.”

Asian Paints posted a 4% (YoY) decline in its net profit at Rs.506 crore on a 8.5% rise in consolidated revenue at Rs.4649 crore.  There was a 30% (YoY) increase in its raw material prices.

The company has stated, “Raw material prices continued to move up further, which has led us to take a price increase from October 2018. In international operations, business conditions continued to remain challenging with issues such as forex unavailability, high inflation and difficult economic conditions impacting performance.”