In August, TiO2 prices cooled 6.7 per cent to an average of Rs 244 a kg from Rs 280 in June. Analysts say the forthcoming festive season and a lower base in the December quarter of FY17 due to demonetisation should help strong volume growth in decorative paints in the third quarter of FY18.
ICICI Securities expects margins of paints companies to improve sequentially in Q2FY18, as paint makers went for a price hike of around 2.5 per cent in May, whose impact will reflect from this quarter. The brokerage is positive on Kansai NerolacBSE -0.19 % and Berger PaintsBSE 1.03 %.
Shares of Kansai Nerolac and Berger Paints have surged 53 per cent and 25 per cent, respectively, to Rs 496 and Rs 264.85 on a year-to-date basis till September 15. Equity benchmark Sensex has 21 per cent during the same period. Shalimar PaintsBSE -1.09 %rose 55 per cent on a year-to-date basis till September 15, 2017.
Other major paint manufacturers, including Asian PaintsBSE -0.03 % and Akzo NobelBSE -0.76 %, have gained 37 per cent and 27 per cent, respectively, during the same period.
The brokerage has a ‘sell’ rating on Asian Paints with a target price of Rs 1,080.
Paint companies such as Berger Paints, Kansai Nerolac, Akzo Nobel and Shalimar Paints should see big gains this festive season, said DK Aggarwal, Chairman and Managing Director, SMC Investments and Advisors.
Rajesh Agarwal of AUM Capital says Berger Paints is going to be a major beneficiary in the paint segment after GST implementation. With the kind of rejig it is doing in its product profile, margins are going to improve. Crude prices will also help the company report better margins.
Even the Nepal subsidiary of Berger Paints is doing well. The company has also done some expansion in Pune. With 15-17 per cent market share and benefit of depressed crude oil prices should help Berger Paints report good numbers, Agarwal said in an interview with ETNow.