Q3FY18 result highlights
Key negatives: Muted revenue growth and margins
Impact on financials: Factoring weak performance we have reduced our FY18/19/20E estimates by 4%/5%/5% respectively.
Valuations & view
Akzo’s revenue growth has continued to lag its peers (Asian Paints, Berger & Kansai Nerolac) which is indicative of continued loss of market share in the decorative segment as well as weak pricing environment in the industrial segment. We expect volume growth & margin improvement for Akzo to remain lower compared to peers considering strong competitive intensity and superior execution from top 3 players. The key monitorable going forward will be Akzo Nobel’s execution on its stated intent of increasing presence in the mass paint segment. Valuations at 35x FY19E and 30x FY20E, look fair considering relatively weak earnings CAGR of 5% over FY17-20E. 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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