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Jun 22, 2016

7th pay commission implementation, monsoon, GST to boost business of these two companies

7th pay commission implementation, monsoon, GST: V-Guard Industries and Kansai Nerolac Paints could give lucrative returns to investors in the next few quarters ahead of implementation of 7th Pay Commission and expected better-than-normal monsoon this year 

V-Guard Industries and Kansai Nerolac Paints could give lucrative returns to investors in the next few quarters ahead of implementation of 7th Pay Commission and expected better-than-normal monsoon this year, according to brokerage house Sharekhan.

Monsoon has covered nearly half of the country, the weather department said on Monday. The June to September monsoon is crucial for farm output and economic growth in India, where just over half of arable land is fed by rain. The farm sector makes up about 15 per cent of the $2-trillion economy that is Asia’s third biggest.

According to a report by FeMoney on June 9, “Central government employees could get the revised pay-scales with their July salaries that would be credited on August 1.”

Sharkhan believes V-Guard Industries and Kansai Nerolac is in a sweet spot due to the presence of multiple positive triggers that are expected to boost growth going forward.

The brokerage house believes that a better south-west monsoon and the 7th Pay Commission payout will drive consumer spending in FY2017 and FY2018 for V-Guard Industries. This would be beneficial for consumer goods players like V-guard. Further, improving clarity over the implementation of GST will be another trigger for V-guard, as a lot of its products compete with the unorganized market. The brokerage house has ‘Buy’ rating on V-Guard shares with target price of Rs 1,585.

On Kansai Nerolac Paints, the brokerage house said implementation of the Seventh Pay Commission recommendations and GST passage would help boost the urban consumption of paints in the coming years. Further, the rural demand is expected to pick up with expectation of normal rainfall in the current monsoon season, which should drive the sales of paints in rural India (especially in the emulsions space).

“Overall, we expect Kansai Nerolac decorative paints business to post a 13.7 per cent CAGR over FY2016-2018,” Sharekhan said in a report.

Better monsoon, introduction of GST would improve growth of decorative paints business: Kansai Nerolac Paints (KNPL) is the third largest paint company in India with an overall market share of around 16%. The repainting space (approximately done after 4-5 years) constitutes about 65% of the overall decorative paint market. Sharekhan is positive on Kansai Nerolac shares.

On Tuesday, shares of V-Guard Industries and Kansai Nerolac were at Rs 1370.30 and Rs 312.35, respectively

SOURCE - financialexpress

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