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Berger: Sales slows down

May 6, 2001

Berger Paints, the third largest paint company in India, has posted a 12% rise in sales to Rs 4,940 m for FY01. The growth in topline has definitely slowed down in the last quarter if one were to consider the company's performance for the first nine months of FY01.

(Rs m) FY00 FY01 Change
Sales 4,415 4,940 11.9%
Other Income 20 21 7.2%
Expenditure 4,007 4,464 11.4%
Operating Profit (EBDIT) 408 476 16.7%
Operating Profit Margin (%) 9.2% 9.6%
Interest 79 83 4.7%
Depreciation 64 84 31.3%
Profit before Tax 285 330 16.1%
Extraordinary item (14) (1)
Tax 33 44 33.0%
Profit after Tax/(Loss) 237 285 20.2%
Net profit margin (%) 5.4% 5.8%
No. of Shares (eoy) (m) 26.6 26.6
Diluted number of shares 26.6 26.6
Earnings per share (Rs) 8.9 10.7

Sales for 1QFY01, 2QFY01 and 3QFY01 grew by 11%, 20% and 11% respectively. For the first nine months of the current year, topline grew by almost 14%. Due to the slow down in the economy and natural calamities in some states, growth seems to have waned in the last quarter. We had projected a 13.5% growth in sales against which the company has reported a 12%. However, growth in 4QFY01 is not available.

Operating profits for FY01 has gone up significantly by 17% to Rs 476 m backed by a 400 basis points rise in operating margins. Despite the rise in rutile titanium dioxide prices and competition, the rise in margins is commendable. This could also be attributed to higher economies of scale with the merger of Rajdoot Paints. However, higher depreciation and tax outflow has resulted in lower profit growth for the company. Net profits for FY01 has risen by 20% to Rs 285 m.

The scrip is currently trading at Rs 89 at a P/E multiple of 8.3x the FY01 earnings. On the sales of Rs 4,940 m, market capitalisation to sales works out to 0.5 times (market capitalisation is Rs 2,364 m).

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