Berger Paint’s performance at T2FY21 was well above our estimates in terms of volume growth and EBITDA margin. The decorative segment volume growth of 15% year-on-year in T2FY21 was one of the best in the industry. The strong growth in volumes was largely due to a strong demand for decorative paint in the semi-urban and rural region where the company has a strong position compared to the industry leader. On the subsidiary side, BJN Nepal was severely affected by the foreclosure during the quarter. On the other hand, the Polish subsidiary Bolix SA posted an improving performance. The subsidiary’s sales growth of 22% year-on-year is also attributable to the acquisition of STP Ltd in November 2019. On the raw materials front, gross margin increased 176 basis points year-on-year, mainly in due to a moderate commodity price which was enough to offset the impact of an unfavorable mix and price. reductions initiated in September-December 2019. In the future, management has seen a good traction in demand in decorative paints, supported by intact demand from level II and III cities as well as an expansion in the activities of water tightness. We revise our revenue estimates upward for FY21 and introduce FY23 estimates with revenue, gaining a CAGR of 13%, 20%, respectively. While we remain positive on the stock, we believe that at the current valuation most of the positives seem to be factored into the price.

Assessment and outlook

We introduce FY23 estimates with a CAGR of 13% and 20%, respectively, for the FY20-23E. We roll over our valuation on FY23 and maintain our HOLD rating with a revised target price of Rs. 675 / share, as the current price captures all the positive short term.

For more details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BergerPaints_Q2FY21.pdf

Shares of BERGER PAINTS INDIA LTD. was last trading on BSE at Rs.652.05 from the previous close of Rs. 648.95. The total number of shares traded during the day was 2,852 in over 233 trades.

The action hit an intraday high of Rs. 653.4 and an intraday low of 648.05. The net turnover during the day was Rs. 1,859,521.


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