KANSAINER - Kansai Nerolac Paints Share Price

Management provided a cautiously optimistic outlook for Kansai Nerolac Paints, indicating that while competitive intensity remains strong in the short term, it has stabilized. They expect to see a recovery in growth rates moving forward, building on some positive trends that have emerged since October 2025. The overall paint industry is growing, even as new entrants capture some market share. Management emphasized their preparedness against competition, particularly in industrial coatings, where they hold a strong operational foundation.

In the automotive sector, management anticipates a dip in growth rates due to base effects related to GST changes but expects a sustained long-term growth rate in the range of 8% to 11%. They highlighted that automotive companies are significantly investing in capacity expansion, projecting that production capacity could double by 2030.

On the profitability front, they aim to increase margins by 200 basis points by enhancing operational efficiency and premiumizing products. The mix of industrial to decorative coatings is now over 50% industrial, which is viewed as beneficial for margin improvement. The focus on construction chemicals is also a key area of growth, with only 30% of homes currently using these products, indicating significant potential.

Management acknowledged ongoing competitive challenges but reiterated their commitment to maintaining a balanced portfolio across decorative and industrial segments. They aim to stabilize their decorative business while focusing on premiumization and expanding into new segments and technologies. Overall, the strategic direction is to strengthen existing segments and explore new growth opportunities without significant divestitures.

1. Question by Mr. Shintani (SMBC Nikko): What is the outlook for the competitive environment in the Deco and industrial segments, especially given recent acquisitions?

Answer by Pravin: The competitive intensity in the short term remains strong but has stabilized. Although smaller players have gained market share, the overall paint industry is growing. We're confident in recovery, as seen since October. In industrial coatings, we have strong technological advantages and established supply chains, making it hard for newcomers to compete effectively. Our strategy includes strengthening current segments and expanding into new ones, ensuring growth in both Deco and industrial markets.

2. Question by Mr. Zhang (CLSA): What are your projections for the medium- to long-term growth rate of the automotive market in India, especially after the GST impact?

Answer by Pravin: Following the GST changes, we've seen production and paint sales increase. While growth may moderate post-GST, automotive firms project robust growth for next year, aiming to double their production capacity by 2030. Sustained growth rates could hover around 8% to 11% in our projections. Factors supporting this include larger vehicles increasing paintable surface area and increasing exports, contributing positively to our growth outlook.

3. Question by Mr. Omura (UBS): What are the initiatives for improving profitability amidst lower margins compared to Japan and Asia?

Answer by Pravin: Our gross margin is affected by our mix of industrial versus decorative segments. We aim to increase margins by 200 basis points through operational efficiency and optimizing sales expenses. The goal is to grow into niche premium segments while carefully managing expenditure. We believe these combined efforts will drive profitability improvements during our mid-term plan.

4. Question by Mr. Okazaki (Nomura): Can you share the current revenue mix within architectural coatings?

Answer by Pravin: Architectural coatings currently make up about 15% of our revenue. Out of our decorative business, 45% is derived from other segments. Our investments have ramped up in the last few years, aiming for significant growth in overall decorative revenue, with strategies to enhance our presence in key areas.

5. Question by Mr. Shah (Nomura): What strategies do you have to improve market share in the liquid coatings segment, where you currently rank No. 3?

Answer by Pravin: We're focusing on both powder and liquid segments. For liquids, we see growth potential linked to government infrastructure spending. Key areas include pre-engineered buildings and railways, and we have a dedicated team targeting these sectors. Our strategy is to strengthen existing segments and capitalize on identified growth opportunities in liquid coatings.

6. Question by Mr. Gorthy: Have you considered divesting the decorative segment to focus on more rapidly growing sectors?

Answer by Pravin: We regularly evaluate each business for growth potential. Our decorative segment has strong brand recall and market position, and we believe significant potential remains. Thus, we prefer to focus on enhancing our existing strengths rather than divesting. We continue to believe in a balanced portfolio across segments and maintain that decorative is valuable to our strategy.