Kansai Nerolac Paints Limited Q3 FY25 Earnings Call Summary

Summary

Kansai Nerolac Paints Limited - Q3 FY 2025-26 Earnings Call Summary Wednesday, February 04, 2026, 11:00 AM IST

Event Participants

Executives 3 Jason Gonsalves (Director-Corporate Planning, IT and Materials), Pravin Chaudhari (Managing Director), Yash Ahuja (Chief Financial Officer)

Analysts 6 Ajay Thakur (Anand Rathi Securities), Amnish Aggarwal (PL Capital), Aniruddha Joshi (ICICI Securities), Avi Mehta (Macquarie Capital), Keyur Pandya (ICICI Prudential Life Insurance), Mihir Shah (Nomura)

Financials & KPIs

Geographic & Segment Commentary

• Decorative Segment: Performance was muted with marginally negative to flat value growth due to a shorter festive window. However, the premium “Paint+” range now contributes >10% of decorative revenue, and services contribute >5%. Management noted a recovery in November and December following a weak October.
• Automotive Segment: Witnessed strong double-digit growth fueled by “GST 2.0” cuts and infrastructure focus. The company successfully launched BTX-free metallic products and conductive primers for 4-wheelers and 2-wheelers.
• Performance Coatings (Liquid & Powder): Liquid coatings saw strong demand from construction equipment and pre-engineered buildings. Powder coatings remained stable, driven by auto ancillaries and electrical appliances.
• International Subsidiaries: Nerofix (Adhesives/CC) is growing at high double-digits with improved profitability. Nepal is recovering after previous disturbances, while Bangladesh remains under stress due to geopolitical/economic uncertainty.

Company-Specific & Strategic Commentary

• Premiumization Focus: The volume and value growth gap in decorative is currently nil, reflecting a strategic shift away from low-margin products like putty toward premium emulsions.
• Technological Innovation: Leveraging Japanese parentage to introduce industrial-grade tech into decorative (e.g., Excel Everlast 20 with 20-year weather resistance).
• Distribution & Infrastructure: Reached ~85% target for Color Cutting Machine (CCD) deployment. The company is investing heavily in “feet on street” and influencer connect programs (architects/painters).
• Backward Integration: Fully integrated for major industrial categories and decorative emulsions. Management views this as a tool for quality control and niche product development rather than just a cost-reduction exercise for commodity segments.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Market Dynamics & Competition

• Question: How are you viewing the merger of AkzoNobel and JSW? (Avi Mehta)
• Answer: Competition remains intense. The combined entity may redeploy royalties into media or influencer programs, but effectiveness depends on their network (Pravin Chaudhari).

Margins & Mix

• Question: Is there a risk to the 13-14% EBITDA guidance given the industrial/deco mix? (Avi Mehta)
• Answer: We are maintaining the 13% level in Q3. Improving industrial margins and a focus on premium decorative products give us confidence in the 13-14% range (Pravin Chaudhari).

Growth Divergence

• Question: Why is decorative growth lagging while industrial is strong? (Keyur Pandya)
• Answer: We are cautiously staying away from low-margin, high-discount “dumping” of products like putty. Our focus is on the quality of the mix, resulting in a nil volume-value gap (Pravin Chaudhari).

Pricing Trends

• Question: What is your stance on recent price moves by Akzo and Birla Opus? (Aniruddha Joshi)
• Answer: Industry prices are stable. The 2-3% adjustments mentioned are not significant enough to change industry dynamics; Opus was simply correcting a lower entry price (Pravin Chaudhari).

Key Takeaway

Kansai Nerolac delivered a resilient Q3 FY26, characterized by a sharp divergence between a robust industrial segment (~10% growth) and a flat decorative business. While decorative performance was hampered by a shortened festive season and heavy monsoons in October, management reported a volume recovery in November and December. Strategically, the company is prioritizing premiumization over low-margin volume, evidenced by a nil volume-value gap and the 10% revenue contribution from the high-end Paint+ range. Despite heightened competitive intensity from new players and incumbents, the company maintained its EBITDA margin guidance of 13-14%, supported by improved industrial profitability and backward integration in emulsions. Looking ahead, management anticipates mid-single-digit growth in decorative for Q4 FY26, anchored by sustained infrastructure demand and a recovery in core paint categories.