InvestorQ : I am holding Kansai Nerolac and SRF in my portfolio? How do you see these two stocks in the light of the results announced on 25th October.
Dawn Cherian made post

I am holding Kansai Nerolac and SRF in my portfolio? How do you see these two stocks in the light of the results announced on 25th October.

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Mitali Bhutta answered.
2 months ago
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Let me talk about Kansai Nerolac results first. It reported 17.1% growth in sales for the Sep-21 quarter at Rs.1,620 crore. While the demand for decorative paints was robust, two things worked against the company. Firstly, the demand for automotive paints remained tepid due to the microchips shortage. Secondly, the industrial paints segment took a hit due to supply chain constraints across various industries.

Kansai took a big hit on profits due to a spike in raw material costs. PAT was down -45% at Rs.92 crore for the Sep-21 quarter. There was a 48% spike in raw material costs. This analysis is self-explanatory. Raw material costs as a share of sales was 57% in Sep-20, but spiked to 72% of sales in Sep-21. Net margins fell sharply from 12.16% to 5.68% on a yoy basis.

Let me now turn to SRF. It reported 35.14% growth in sales for Sep-21 quarter at Rs.2,839 crore. The technical textiles vertical revenues grew 68.1% at Rs.558 crore and the chemicals business revenues grew 27.9% at Rs.1,126 crore. Even packaging film revenues was up 28.65 yoy at Rs.1,072 crore. The company saw its solvency ratios improving in the quarter.

PAT was up 21.34% at Rs.382 crore for the Sep-21 quarter. SRF did see a sharp spike in raw material and power costs. The technical textiles and chemicals business reported higher EBIT even as the packaging films vertical saw EBIT falling by -26.8% yoy. Net margins at 13.47% was lower than 15% on a yoy basis.

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