Berger: What in FY04? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Berger: What in FY04?

Dec 18, 2002

Berger Paints is the third largest paint manufacturer in India with an overall market share of 13.0%. It is India’s second largest decorative paint manufacturer (11.1%) and also the third largest industrial paint manufacturer (13.9%). Over two-thirds of its turnover comes from decorative paints and balance from industrial paints. It benefits from a strong product mix, brand popularity and has a strong distribution network. The company acquired Snowcem India’s exterior paint division in FY02.Positives:
On the macro front, the Indian housing industry has been growing at the rate of 12%-14% in the last five years. Increasing household incomes, rising double income families and decline in housing loan rates have given a new lease of life to the housing industry. Added to the positivism are the tax incentives, which made housing an affordable proposition. We expect the housing sector to grow at 2x GDP in the medium-term, which will result in increased demand for the paint sector.

The per capita consumption of paints continues to remain sluggish at 0.5 litres. When compared to other developed countries, the figure is relatively very low. This coupled with strong brands, widespread distribution network, significant market presence in Eastern India would enable Berger to notch higher growth rates in the future. Over the last six years, the company’s revenues have grown at a CAGR of 14%. We expect revenues to grow at a CAGR of 7% over the next five years.

Berger acquired Snowcem India’s exterior paint division in FY02. Snowcem is the second big player in the exterior paint segment (market leader being Asian Paints). Lack of new product introductions and regional presence resulted in Asian Paints overtaking Snowcem, in terms of market share, in the last three years. But given Berger’s distribution and production expertise, we expect this acquisition to significantly add to the volume growth of Berger.

Negatives:
One of the key concerns is poor monsoon in the first half of the current fiscal year. On the back of an expected 6% fall in food grain production in FY03, CMIE’s GDP growth estimate is pegged at a meager 3.1%. Since paint demand tends to be on the higher side during the festive season, which in turn in reliant on the rural economy, we expect a sluggish growth in revenues in FY04.

Valuations:
The stock currently trades at Rs 72 implying a P/E multiple of 6x FY03E earnings. Valuations when compared with Asian Paints that is trading at 16x FY03E earnings seem to be on the lower side. But it has to be remembered that Asian Paint’s market leadership, marketing and distribution abilities are superior and so are operating parameters.

Valuation comparison...
ParticularsAsian PaintsGoodlass NerolacBerger Paints
Current price (Rs) 330.0 140.0 72.0
P/E (x) 15.7 7.8 6.0
Market Cap/Sales (x) 1.5 0.4 0.3
Performance parameters
Operating margin (%)16.3%8.7%9.3%
Return on Assets (%)11.3%6.1%9.4%
Return on Networth (%)26.1%13.1%18.6%
Net working capital/Sales (%)9.9%19.2%25.8%

For more detailed analysis with projections, view our complete research report on Berger Paints.


Equitymaster requests your view! Post a comment on "Berger: What in FY04?". Click here!

  

More Views on News

BERGER PAINTS Announces Quarterly Results (1QFY21); Net Profit Down 88.9% (Quarterly Result Update)

Sep 1, 2020 | Updated on Sep 1, 2020

For the quarter ended June 2020, BERGER PAINTS has posted a net profit of Rs 196 m (down 88.9% YoY). Sales on the other hand came in at Rs 9 bn (down 45.8% YoY). Read on for a complete analysis of BERGER PAINTS's quarterly results.

BERGER PAINTS Announces Quarterly Results (3QFY20); Net Profit Up 37.9% (Quarterly Result Update)

Feb 6, 2020 | Updated on Feb 6, 2020

For the quarter ended December 2019, BERGER PAINTS has posted a net profit of Rs 2 bn (up 37.9% YoY). Sales on the other hand came in at Rs 17 bn (up 4.9% YoY). Read on for a complete analysis of BERGER PAINTS's quarterly results.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

BERGER PAINTS SHARE PRICE


Sep 24, 2020 02:36 PM

TRACK BERGER PAINTS

  • Track your investment in BERGER PAINTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

BERGER PAINTS 5-YR ANALYSIS

COMPARE BERGER PAINTS WITH

MARKET STATS