Effect of Covid-19 on paint and coating industry

columnist – Sumit Bhardwaj

The lockdown has been continuing since 3 odd number of months and we are going to face a lot of trouble in our upcoming future. We will see a rapid decline in our growing economy. And if we will talk about paint and coating industry, they were facing a lot of problem due to this pandemic. They will face the problems like, lack of manpower and social distancing norms and after analyzing the current situation of the country, we say that painting activity may resume only in Fiscal Year 21 (FY21) second half. While many analysts were analyzing and expecting a 10% fall in the revenue in the paint industry, Quarter 4 (Q4) results show 14% year – on – year deadline.
Covid19 is keeping the workers (painters) away, and things are going to get worst for the paint companies in the next upcoming two quarters. Some of the things are already clear in Kansai Nerolac Paints Ltd.’s fourth quarter results. Querter4 fig. was pastel than the usual time due to falling volumes in its industrial and decorative paints divisions. Further, demands in its industrial’s division, which includes autos, may see a further declaration in the next one or two quarters. Auto sales were immaterial in April, and could remain tame for the few quarters. Besides, construction activity is also looking drab.
It has been expected that the paint company will face approx 55% decline in the sales in H1 as the consumers seem to defer discretionary activities such as repainting (to avoid close contact with labor because they are very much concerned about their health), which is a good sign of following the norms of the government. Once the lockdown is over, it would release pent – up demand from incomplete re – painting projects, but we do not expect much new re – painting work and that too in urban markets. Nor a pickup in fresh painting from any type of construction. It is very tricky to predict the outlook for auto coatings and rural markets, said Kotak Institutional Equities in a note to clients.
Production at some company’s plants has been resumed, which is encouraging. However, investors will be watching whether some of the pent – up demand will pick up in the second half of FY20. Kotak has slashed earning estimates by about 41% from FY21. At the current price, the stock’s one – year forward price – earning works out to 63 times. The stock has fallen 8.2% since the results were declared, and is down 17.1% in the past one year.
According to me the price of the paint and coating products will not get decreased after the pandemic will be over as the price of the products are already very low and I hope, once this gets over we will see a rapid growth in this industry and they will cover up all their losses due to the pandemic.

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