“Berger Paints, with a 19% market share in decorative paints, is second only to Asian Paints. The company is increasing its focus on water-based paints, which currently accounts for 50% of total sales.....
Dolat Capital is bullish on Berger Paints India and has recommended buy rating on the stock with a target of Rs 124 in its October 4, 2011 research report.
“Berger Paints, with a 19% market share in decorative paints, is second only to Asian Paints. The company is increasing its focus on water-based paints, which currently accounts for 50% of total sales. It launched three products in FY11 and plans to introduce more products and line extension in the waterbased segment. We believe an expanded distribution and increasing focus on the high-growth south Indian market will ensure strong volume growth. We estimate a 14% CAGR in volume for Berger Paints during FY11-13E. With strong demand in decorative paints, Berger Paint has drawn up capacity expansion plan in the water-based segment. This shall double its capacity by end of FY13 to more than five lakh tonnes. The capex will be funded through internal accruals at an investment of Rs 3bn (Rs 1.3bn having already been spent). The addition is largely in the water-based paints segment.”
“Berger Paint, which has been perceived as a company with a focus on the value-for-money segment, is now beginning to increase its focus on highmargin premium paints. Currently, 20% of the sales comes from the premium segment and the rest from the mid and mass segments. We believe that while the better mix will improve gross margins, Berger Paints will have to spend on advertising and brand-building as it expands its premium product portfolio. We estimate an EBITDA margin of 10.1% for FY12E and 10.6% for FY13E. We estimate a consolidated revenue CAGR of 17.5% and earnings CAGR of 20% during FY11-13E. We also estimate a 14% CAGR in domestic volume during FY11-13E. For the subsidiaries, we expect 14% CAGR in revenue and PAT of Rs 30mn by FY13E.”
“At current market price, the stock trades at 19x FY12E EPS of Rs 5.2 and 16x FY13E EPS of Rs 6.2. Berger Paints has been trading at 24% discount to Asian Paint on a historical one-year forward P/E multiple basis during FY07-11. We believe a better margin profile and imporvement in return ratio will narrow the gap. We arrive at a target price of Rs 124, based on a P/E of 20x FY13E EPS of Rs 6.2. We assign a P/E of 20x based on improving earning growth, CAGR of 20% during FY11-13E from a 14% CAGR during FY07-11,” says Dolat Capital research report.
....
more infoDolat Capital is bullish on Berger Paints India and has recommended buy rating on the stock with a target of Rs 124 in its October 4, 2011 research report.
“Berger Paints, with a 19% market share in decorative paints, is second only to Asian Paints. The company is increasing its focus on water-based paints, which currently accounts for 50% of total sales. It launched three products in FY11 and plans to introduce more products and line extension in the waterbased segment. We believe an expanded distribution and increasing focus on the high-growth south Indian market will ensure strong volume growth. We estimate a 14% CAGR in volume for Berger Paints during FY11-13E. With strong demand in decorative paints, Berger Paint has drawn up capacity expansion plan in the water-based segment. This shall double its capacity by end of FY13 to more than five lakh tonnes. The capex will be funded through internal accruals at an investment of Rs 3bn (Rs 1.3bn having already been spent). The addition is largely in the water-based paints segment.”
“Berger Paint, which has been perceived as a company with a focus on the value-for-money segment, is now beginning to increase its focus on highmargin premium paints. Currently, 20% of the sales comes from the premium segment and the rest from the mid and mass segments. We believe that while the better mix will improve gross margins, Berger Paints will have to spend on advertising and brand-building as it expands its premium product portfolio. We estimate an EBITDA margin of 10.1% for FY12E and 10.6% for FY13E. We estimate a consolidated revenue CAGR of 17.5% and earnings CAGR of 20% during FY11-13E. We also estimate a 14% CAGR in domestic volume during FY11-13E. For the subsidiaries, we expect 14% CAGR in revenue and PAT of Rs 30mn by FY13E.”
“At current market price, the stock trades at 19x FY12E EPS of Rs 5.2 and 16x FY13E EPS of Rs 6.2. Berger Paints has been trading at 24% discount to Asian Paint on a historical one-year forward P/E multiple basis during FY07-11. We believe a better margin profile and imporvement in return ratio will narrow the gap. We arrive at a target price of Rs 124, based on a P/E of 20x FY13E EPS of Rs 6.2. We assign a P/E of 20x based on improving earning growth, CAGR of 20% during FY11-13E from a 14% CAGR during FY07-11,” says Dolat Capital research report.
....