Kansai Nerolac Paints (500165) Q1 25/26 earnings summary

Executive summary

• Achieved modest revenue growth in Q1 FY26, with standalone revenue up 1.8% and consolidated up 1.4% year-over-year.

• Decorative segment faced flat or modest volume, impacted by early monsoon and regional disruptions, but new products and services gained traction, contributing over 10% of business.

• Industrial segment outperformed the market, especially in auto and protective coatings, maintaining or gaining market share through innovation and technology upgrades.

• Recognized for ESG initiatives, now water positive, with over 40% green energy usage and top percentile rankings in global indices.

• International operations were mixed, with Nepal performing well and Bangladesh and Sri Lanka remaining challenging.

Financial highlights

• Standalone Q1 FY26: Revenue ₹20,874M (+1.8%), EBITDA down 6.7%, PAT ₹2,309M (11.1% margin); consolidated Q1 FY26: Revenue ₹21,620M (+1.4%), EBITDA down 8%, PAT ₹2,156M (10.0% margin).

• Material costs increased to 63.9% of revenue; operating expenses rose to 22.1% of revenue (consolidated).

• Decorative business saw flat volume and low single-digit value decline; industrial segment grew high single digits in volume.

• Consolidated losses mainly attributed to Bangladesh operations.

• Earnings per share (EPS) for Q1 FY26: Standalone basic ₹2.86, consolidated basic ₹2.73.

Outlook and guidance

• Decorative demand expected to improve with favorable monsoon, early festive season, and improved construction activity.

• Industrial segment anticipated to maintain market-leading growth; auto segment growth expected in mid-single digits, non-auto industrial to grow high single to double digits.

• Margin guidance for FY26 at 13%-14%, up from 12.8% last year, subject to competitive intensity and raw material trends.

• Management remains cautious due to ongoing geopolitical, forex, and inflationary uncertainties.