Kansai Nerolac Cheapest Bet Despite Rising The Most Among Paint Makers
Kansai Nerolac Paints Ltd., India’s second-largest paint maker by market value, returned the highest gains among peers in the last one year. Yet, it’s the cheapest among them and has a potential to rise further.
The stock trades at 40.5 times its one-year forward earnings estimates, a discount of up to 6 percent to its larger peer Asian Paints Ltd. and Berger Paints India Ltd.
Shares of Kansai Nerolac gained more than 35 percent in financial year 2018 despite losing 13 percent since January. That’s more than 10 times the returns given by Asian Paints and Berger Paints. The surge helped it overtake Berger Paints to become the second-largest paint maker by market capitalisation.
About 83 percent of the analysts tracked by Bloomberg have a ‘Buy’ rating on the stock with consensus target price of Rs 499.85, indicating an upside of 13.5 percent.
Kansai Nerolac is well-placed in the industrial and decorative paints segment to benefit from a boost in consumption due to higher disposable incomes after implementation of the Seventh Pay Commission and a normal monsoon forecast, ICICI Securities said in a note. A sustained volume growth due to capacity addition will also aid growth, it said.