Kansai bets on industrial paints for glossy growth, but near-term is patchy

The goal: to become India’s second-largest coatings company by 2030. Kansai is targeting a revenue CAGR of about 9% and an Ebitda margin of 14–15% over the next three years. By 2030, it aims to scale to 10% revenue CAGR and an 18% Ebitda margin, driven by premiumisation and cost-optimisation.

Systematix Shares and Stocks (India) estimates Kansai’s revenue over FY22-FY25 at 7% CAGR. In 9MFY25, the company’s Ebitda margin stood at 12.9%. “We view these plans as reasonably ambitious, with new management looking past near-term industry turmoil to a healthier medium/long-term performance,” said a Systematix report on 19 April. 

Read this | Raamdeo Agrawal says he is going to make money on ‘bruised blue chip’ Asian Paints this time

Kansai Nerolac has appointed Pravin Chaudhari as managing director for a three-year term starting April 2025.

Additionally, it aims to maintain its leadership in auto and powder coatings while climbing to the top spot in industrial coatings, where it currently ranks third in the general industrial and high-performance segments. By 2030, the auto business—driven by innovation—is expected to account for 35% of the portfolio, up from 30% now. The industrial segment is projected to rise to 25% from 15%. As a result, the decorative business share will reduce to 40% from 55%, even as the segment continues to grow.

While this strategic pivot bodes well for the long term, near-term demand concerns persist. Kansai’s management acknowledged that intense competition in the decorative segment is causing a redistribution of industry market shares. Soft demand in the urban markets has meant significant consumer downtrading. Still, it expects a recovery in industry growth over the next 9–12 months.

Read this | Weak rupee a new worry for paint companies

The company is scheduled to deliver March quarter (Q4FY25) results on 6 May. HDFC Securities expects a muted revenue growth of about 2%. Decorative paints segment volume growth is seen at 2%, but pricing may drop. While the broking firm expects 30 basis points year-on-year rise in gross margin to 34.7%, Ebitda margins could shrink 100bps to 9% due to elevated operating costs.

Also read | AkzoNobel may sell only paints biz in India for up to $1.7 billion as Pidilite, JSW, Indigo enter second round

Kansai shares have declined about 4% over the past year, underperforming the Nifty500’s gains. The stock trades at 29 times estimated FY26 earnings, according to Bloomberg data. While the strategic roadmap is encouraging, a re-rating may remain elusive until the pressure on decorative paints demand eases—making current valuations appear less compelling.