Q4FY18 result highlights
Key positives: Control over other expenses.
Key negatives: Muted revenue growth and margins.
Impact on financials: We have increased our FY19/20E estimates by 2%/4% respectively.
Valuations & view
Akzo’s revenue growth in the coatings business has seen recovery on sequential basis. However it continued to lag its peers (Asian Paints & Kansai Nerolac revenues grew by 14% and 17% in 4QFY18) impacted by lower focus in the high growth economy segment in decorative business and weak demand environment in certain segments (wind and marine coatings) in the industrial business. We believe volume growth trajectory is likely to remain below peers given the management’s focus on profitability (inline with parent company’s strategy). Valuations at 37x FY19E and 31x FY20E, look fair considering relatively inferior profitability and return metrics. Maintain Neutral rating on the stock.
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.
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