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Berger Colourful prospects - Views on News from Equitymaster
 
 
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  • Nov 3, 2000

    Berger Colourful prospects

    Berger Paints has posted a sharp 28% increase in net profits for the second quarter ended 30th September 2000. The company has shown significant improvement at the operating level in terms of profits as well as margins. Margins have gone up by 100 basis points from 9.4% in 2QFY00 to 10.3% for the second quarter.

    (Rs m) 2QFY00 2QFY01 Change
    Sales 1,112 1,335 20.0%
    Other Income 3 4 2.9%
    Expenditure 1,008 1,198 18.8%
    Operating Profit (EBDIT) 104 137 31.6%
    Operating Profit Margin (%) 9.4% 10.3%  
    Interest 25 27 8.5%
    Depreciation 16 21 35.0%
    Profit before Tax 67 93 37.9%
    Tax 9 18 105.9%
    Profit after Tax/(Loss) 59 75 28.1%
    Net profit margin (%) 5.3% 5.6%  
    No. of Shares (eoy) (m) 26.6 26.6  
    Diluted number of shares 26.6 26.6  
    Earnings per share* 8.8 11.3  
    *(annualised)      

    This is a creditable performance given the fact that basic raw material prices have been on the uptrend for the last two quarters due to high crude prices. However, higher incidence of tax and depreciation have shrinked margins at the net profit level.

    The company's merger with Rajdoot Paints have started to pay-back by way of higher sales growth and better asset utilisation. Berger Paints recently acquired Jenson & Nicholson (Nepal) Ltd. This provides an entry into the lucrative Nepal market where J&N has significant market share. Further, Berger has been scouting for acquisitions in the domestic as well in the SAARC countries to enhance its presence in the global market. Since festive season is spread over two quarters in the current year, the company is expected to show significant improvement in sales and profits.

    The stock is currently trading at Rs 94 at a P/E multiple of 8.3x the annualised 2QFY01 earnings.

     

     

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