BERGEPAINT - Berger Paints India Ltd

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Please find below mentioned short term fundamental stock for delivery purpose.

 

Company	CMP	Target	BSE Code	NSE Code
Berger Paints (I) Ltd.	506	650	509480	BERGEPAINT

 

Berger Paints India Limited is the second largest paint manufacturing company in India and amongst the 15th largest in the world. The company is the 9th largest decorative paint manufacturing company in the world. Berger offers products and solution in Interior wall Coating, Exterior Wall Coating, Undercoats (putty) and Waterproofing Solutions etc. Nalanda India Fund is the largest non-promoter shareholder with around 4% holding as on March 2020.
 

 

Second largest player: Berger paints is the second largest player in paint industry in India with market share of over 20%. The company has 16 strategically located manufacturing units and about 162 stock points. With employee strength of above 3,400 and a countrywide distribution network of 25,000+ dealers, Berger is acclaimed as a game changer in the sector with a vibrant portfolio of paints and tailor-made customer services in every paint segment.In addition to India it also has presence in four other countries Nepal, Bangladesh, Poland and Russia. Decorative paints continue to be the largest business segment for the Company and the largest contributor - both in terms of volume and value sales and EBIDTA.
 

Entry in new segment - home, personal hygiene: In line to the words - ‘in the middle of difficulty lies an opportunity’, Berger has seized the opportunity to enter into home & personal hygiene when the pandemic has disrupted all the businesses. Company is going to produce sanitizer (with brand name Breath easy) commercially and entering home and personal hygiene space across the country. India’s sanitizer market, a small segment even a couple of months ago, might touch Rs 500-crore mark this year. In the new normal, the company is expecting a good demand for its health and hygiene ranges. Post-Covid, Berger plans to take Silk Breathe Easy Paint, Express Painting to rural areas and smaller towns.
 

Well-positioned to grab unorganized sector market share: On account of strong product innovation, brand building and heavy capex to meet demand has yielded positive returns as company has successfully maintained its market share in domestic market despite stiff competition from aggressive market leader, MNC paint players as well as unorganized players. Unorganized sector is getting reduced year over year (~30% in 2020 from ~45% 2016) and likely to further shrink on account of ongoing pandemic situation. We believe Berger is well-positioned to grab unorganized market share.
 

Demand to normalize post COVID 19: Company management commented inventory has declined and they may see replenishment demand. Management iterates that demand is expected to bounce back once COVID-19 is under control.

 

Robust financials: During Q3FY20, Company has reported 5%, 5.6% and 37% YoY growth in net sales, EBITDA and profit respectively. The Company has reasonable debt/equity of 0.2x while generating strong return ratios. At current price, the stock is trading at 66.6x of its one year forward earnings which is slightly premium to its closest competitor Asian Paints, but given the quality business and better growth prospects, we believe the stock is fairly valued.
​Fundamental  on 16.06.2020

बर्जर पेंट्स इंडिया लिमिटेड भारत में स्थित एक भारतीय पेंट कंपनी है। कंपनी का मुख्यालय कोलकाता में है और भारत में इसकी 14 विनिर्माण इकाइयाँ हैं, 2 नेपाल में, 1 पोलैंड और रूस में है। इसकी हावड़ा और ऋष्रा, अरिनसो, तलोजा, नलतोली, गोवा, देवला, हिंदूपुर, जेजुरी, जम्मू, पुदुचेरी और उद्योगनगर में विनिर्माण इकाइयाँ हैं।

• Market Cap:  49,100 Cr.
• Current Price:  505.45
• 52 weeks High / Low  597.45 / 300.05
• Book Value:  25.27
• Stock P/E: 73.89
• Dividend Yield: 0.38 %
• ROCE: 28.20 %
• ROE: 21.00 %
• Sales Growth (3Yrs): 12.80 %
• Listed on BSE and NSE
• Face Value:  1.00

• PEG Ratio: 5.09
• Promoter holding: 74.99 %
• Pledged percentage: 0.00 %
• Debt:  520.05 Cr.
• Price to Earning: 73.89
• EPS:  6.88
• Net profit:  664.47 Cr.
• Profit growth: 35.68 %
• Profit growth 7Years: 15.39 %
• Net profit preceding 12months: 615.30 CrH.
• Profit growth 3Years: 10.87 %
• Dividend yield: 0.38 %
• Debt to equity: 0.21
• Sales last year:  6,062 Cr.
• Sales growth: 10.11 %
• Unpledged promoter holding: 74.99 %
• Investments:  394.92 Cr.
• Intrinsic Value:  560.57

Positive:

Company has been maintaining a healthy dividend payout of 36.95%

Negative:

Stock is trading at 20.00 times its book value

The company has delivered a poor growth of 10.19% over past five years

Duration of recommendation: Medium term to long term.
 

Best Regards,

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