Berger Paints India Ltd. (BPIL) is one of the India’s foremost
paint companies, currently ranked as second largest on the basis
of consolidated sales turnover in Indian paint industry. It enjoys
about 19 percent share of the over Rs.21,000 crore of the Indian
paint industry.
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The company has registered smart numbers for the quarter
ending March 2012. Revenues from operations stood at Rs. 746.50
crore as against Rs.592.50 crore in the corresponding quarter of
the last year representing an increase of about 26%. Improved
sales performance by subsidiaries and joint ventures boosted
revenue for the quarter together with strong domestic
performance. Operating profit too surged 29.45% in Q4FY12 at
Rs.73.40 crore from Rs.56.70 crore in the like quarter last year. A
comparatively sharp net profit growth of about 32% to Rs.44.60
crores was clocked for the Q4FY12 compared to Rs.33.90 crore of
same quarter previous year. The increase in net profit is due to
improved performance in the emulsion business and growing
presence in the western part of the country. EPS stood at Rs.1.29
compared to Rs.0.98 in the same quarter last year.
Material cost to sales(%) jumped at 64.3% in quarter ended March
2012 as compared to 62.2% in the corresponding quarter last year.
This increase is attributable to consistent rise in raw material
prices and impact of depreciating rupee on imported raw
materials. Further, there is sustained increase in advertisement
and sales promotion spends in decorative business.
Valuation
With stronger market share, wide distribution network, huge
capacity expansion on stream, better product mix and higher A&SP
spends; Berger Paints India Ltd. growth prospects look promising.
We believe BPIL is trading at an attractive valuation at 22.9x and
19.79x of FY13EPS of Rs.6.29 and FY14EPS of Rs.7.28. We initiate a
‘BUY’ on the stock with a target price of Rs.190 (appreciation of about
32%) with the medium to long term investment horizon.
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