Analyst Nook – Berger Paints: Preserve ‘maintain’ with DCF-based TP of Rs 800


Standalone enterprise reported income and PAT progress of 53% and a couple of.5%, respectively.

Q4FY21 outcomes: Berger reported consolidated income, Ebitda, PAT progress of 49.5%, 61% and 101%, respectively. We consider quantity progress was ~55% YoY. Key causes for robust efficiency have been (1) continued momentum in client off-take from Q3FY21, (2) restoration metros and tier-1 cities, (3) restoration in industrial paints and (4) favorable base. Gross margin was secure at 43.7% YoY however Ebitda margin expanded 118bps seemingly because of price saving initiatives. Standalone enterprise reported income and PAT progress of 53% and a couple of.5%, respectively.

Income restoration in step with sector: The paint sector (4 market main firms) reported income and Ebitda progress of 6% and 12.4%, respectively in FY21. Whereas Berger’s Q4FY21 are superior to its friends, we be aware Berger’s FY21 income and Ebitda progress of seven.1% and 12%, respectively is basically in-line with the sector progress charges.

Greater give attention to ancillary merchandise: It has been specializing in ancillary merchandise comparable to waterproofing and putty. It believes there’s immense potential for these segments to develop contemplating low penetration. We mannequin waterproofing to contribute considerably to Berger ornamental enterprise in medium time period.

Rising enter costs however some margin tailwinds: Enter costs are up 10-100% YoY however we mannequin Berger to report simply 50bps decrease Ebitda margins because of (1) enhance in income share of premium paints with restoration in metros, (2) selective worth hikes and decrease commerce schemes, (3) price saving initiatives, (4) working leverage and (5) optimistic contribution from ancillary companies.

Rs of 15.9% and 17.5% YoY respectively over FY21-23. RoE is predicted to be secure ~24% over FY21-23. Nonetheless, we consider the inventory worth upside is restricted at present valuations and therefore keep HOLD ranking with a DCF-based goal worth of Rs 800. Key upside danger is higher-than-expected market share positive factors in paints. Key draw back dangers are steep enhance in enter costs and enhance in aggressive strain.

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