Q1FY20 result highlights
Key positives: Healthy gross margin expansion.
Key negatives: Weak revenue growth in coatings business.
Impact on financials: Factoring better margins, we have increased our FY20/21E estimates by 8-9%.
Valuations & view
Akzo’s revenue growth remains much lower compared to peers like APNT, Berger as well as Kansai Nerolac (rev growth of 6.6% yoy), which has similar exposure to industrial segment. The revenue growth is indicative of relatively weaker growth in decorative segment (-60-65% of sales) while Industrial business is likely to have seen sharp decline on account of weakness in Automotive and other industrial segments. Akzo’s margin trajectory remains healthy led by improved mix (led by growth in premium decorative portfolio) and control over other overheads. As highlighted earlier too, revenue growth underperformance remains a concern, which we believe is likely due to sharp weakness in industrial segment and lack of participation in the mass decorative segment. While valuations at 30x/27x FY20/21E are at discount to its peers, we believe the discount is unlikely to narrow considering weaker execution and return profile. Maintain Neutral and would await improvement in volume growth to change our rating. ​
ICI India is engaged in the manufacture and sale of paints. Co.'s primary business segments are paints and chemicals. The Paints business segment includes decorative and refinishing and the Chemical business segment includes uniqema, food starch, polymers, adhesives, and rubber chemicals.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.