Fall in crude oil prices may add shine to paint firms; here’s what brokerages have to say

Shares of paint firms have been buzzing on Dalal Road amid the continuing fall in crude oil costs and better-than-expected monetary leads to the June quarter. Of late, the worth of brent crude oil fell by 14 per cent previously one month. Generally, larger crude oil costs improve enter prices for paint firms, which use crude derivatives.

With a rally of 27 per cent, Kansai Nerolac Paints emerged as the highest gainer within the sector previously one month. On the hand, the benchmark BSE Sensex gained 8 per cent throughout the identical interval. Different paint majors Asian Paints and Berger Paints jumped 20 per cent and 15 per cent, respectively.

Indigo Paints and Akzo Nobel additionally superior 7 per cent and 1 per cent, respectively. Shalimar Paints (down 1.90 per cent) stood as the one loser amongst paint firms previously one month. Nonetheless, shares of the corporate have gained 42 per cent on a year-to-date (YTD) foundation.

Commenting on the sector, Vinod Nair, Head of Analysis, Geojit Monetary Companies stated, “A fall in oil costs is a lift for the paint business. Revenue from the deflationary uncooked materials costs will likely be mirrored within the expansionary margins throughout H2FY23.”

Paint majors, together with Asian Paints, Berger Paints and Indigo Paints, reported over 70 per cent year-on-year (YoY) progress in web revenue for the quarter ended June 2022. Kansai Nerolac Paints and Akzo Nobel reported a progress of 36.51 per cent and 1.32 per cent YoY, respectively, in web revenue in Q1FY23.

Sharing its view on Asian Paints, Motilal Oswal Monetary Companies stated, “The momentum witnessed in February-March’22 sustained in Q1FY23, resulting in a 10-12 per cent beat in gross sales, EBITDA and PAT as in contrast with our expectations.” Asian Paints is the chief in India’s paint business with a market share of over 50 per cent. It’s the third-largest participant in Asia and the ninth-largest globally.

Whereas retaining its bullish view on Kansai Nerolac with a goal value of Rs 500, Nomura stated, “Kansai Nerolac’s standalone Q1 revenues had been a lot above our and Bloomberg consensus estimates.”

Julius Baer Fairness Analysis can also be optimistic on Kansai Nerolac with a goal value of Rs 575. “We stay optimistic on long-term progress prospects of the home paint business, given India’s low per capita consumption, rising earnings, decrease repainting cycle, and authorities’s give attention to housing and infrastructure. Nonetheless, inflationary pressures, demand setting and growing competitors stay key monitorables,” the brokerage home stated.

Sharekhan is bullish on Indigo Paints with a goal value of Rs 2,250, indicating an upside of over 40 per cent from the present market value. “Indigo Paints posted sturdy numbers in a tricky setting of uncooked materials inflation and slowdown in client demand,” the brokerage stated, including that the costs of a few of the key inputs, corresponding to emulsion monomers, titanium dioxide and packaging materials, have corrected from their excessive in final six months.

“If costs continued to say no or stay secure within the coming months, the corporate will see YoY substantial enchancment within the margins from Q3FY2023,” Sharekhan stated.