Goodlass Nerolac, the market leader in the industrial paints segment has posted a 10% growth in sales for the first quarter FY01. The operating margins faired marginally as the expenses shot up by 10.4% in line with the sales growth.
This can be attributed to the increasing raw material prices globally, especially titanium dioxide, as well as for other petroleum based products. However a sharp fall in the interest outflow prevented the bottomline from a considerable decline. The net profit is up from Rs 43 m in 1QFY00 to Rs 52 m for the current year.
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Sales growth slowed down as Maruti Suzuki, one the major client of Goodlass Nerolac, has been losing its market share to the other multinationals like Hyundai, Daewoo and Ford in all segments. Moreover, Telco's decision to cut production of Indica by 20,000 units for the current year may further slowdown the sales growth. The general decline in sales volume in the passenger car segment is expected to be short-lived, as industry feels volumes might pick up during the later part of the year. This along with the companies focus to increase its presence in the decorative segment may compensate the loss in the other segment.
The stock is currently trading at Rs 132 at a P/E multiple of 9.6x on the annualised first quarter FY01 earnings.
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