Paint companies have had a great run over the last three years, with stock prices surging 50-100% thanks to the steady uptick in both sales and profit. This has led to a sharp re-rating of the stocks, with the poster boy of the industry Asian Paints trading at 36x FY17 estimated earnings as against 33-34x for Berger Paints and Kansai Nerolac. The other major player, AkzoNobel India, is trading at 29x FY17 estimated earnings.
The steep fall in the crude price has been a major trigger and has eased the raw material costs of paint companies. Brent crude traded at an average price of $53 in CY15. While companies are yet to declare their full FY16 numbers, analysts expect raw material
costs as a percentage of sales to have come off by 2