Tag - berger paints

    • Tag -
  • berger paints
11 Aug

Price hikes neutralised material price increase – Berger Paints

Update on the Indian Equity Market:

On Wednesday, Indian stocks recovered from sharp declines and closed the session almost unchanged. The Nifty50 ended marginally higher at 16,282 led by TATASTEEL (+4.0%), JSWSTEEL (+3.5%), and IOC (+2.5%). SHREECEM (-2.1%), KOTAKBANK (-1.9%), and SUNPHARMA (-1.8%) led the laggards. Among the sectoral indices, METAL (+3.1%), OIL & GAS (+1.2%), and PSU BANK (+0.5%) led the gainers. PHARMA (-1.5%), PRIVATE BANK (-0.7%), and BANK (-0.6%) led the laggards.

Excerpts of an interview with Mr. Abhijit Roy, MD & CEO, Berger Paints (BERGEPAINT) with Economic Times on 10th August 2021:

  • April and May months were impacted due to the lockdown restrictions. In June and July, demand bounced back to normal. Demand is likely to remain strong in the subsequent months.
  • The Company has taken price hikes in the water-based paints which contribute to a bulk of their sales. This hike neutralised the entire raw material price increase. In solvent-based enamel paints, they are yet to pass on the entire price increase. In industrial paints, negotiations are ongoing and expected to be finalised soon.
  • Some erosion in terms of gross margin is expected to be made up by cost savings and BERGEPAINT expects to retain the current level of margins.
  • The price increase is about 5-6%, taken in stages. Despite the discretionary nature of their products, demand hasn’t really been affected.
  • The revenue from new construction projects declined in FY21. With the easing of restrictions, there has been a surge in new construction projects. New construction projects and repainting are contributing to overall growth in the business.
  • The inventory levels are low at the company level. With every price increase, there was an increase in dealer-level inventory.
  • BERGEPAINT has always welcomed competition. The company has its own strengths and built its own network over time. Brand building takes a long time in the paints category, and BERGEPAINT continues to maintain its market share.

Asset Multiplier Comments

  • BERGEPAINT 1QFY22 results beat street estimates as the impact of lockdowns was not as severe as anticipated. Most companies have been bearing the brunt of higher crude oil prices. BERGEPAINT was no exception and reported margins were lower sequentially.
  • Though near-term headwinds remain due to higher raw material prices, we believe BERGEPAINT to benefit from rising distribution reach, a strong presence in urban markets, and calibrated pricing.

Consensus Estimate: (Source: market screener website)

  • The closing price of BERGEPAINT was ₹ 820/- as on 11-August-2021. It traded at 88x/ 71x/ 59x the consensus earnings estimate of ₹ 9.3/11.5/13.8 for FY22E/ 23E/ 24E.
  • The consensus target price of ₹ 696/- implies a PE multiple of 50x on FY24E EPS of ₹ 13.8/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Berger Paints, Paints , , 0 Comments Read more...
03 Mar

Demand remains strong, expect 4QFY21 to be better than 3QFY21 – Berger Paints

Update on the Indian Equity Market:

On Wednesday, Nifty50 ended in the green at 15,246 (+2.2%), lifted by heavyweight Reliance Industries which gained after winning INR 571 bn worth of airwaves in the recently concluded spectrum auction.  The stock gainers in Nifty50 were TATASTEEL (+5.3%), BAJAJFINSV (+5.0%), and RELIANCE (+4.8%) while the auto companies HEROMOTOCO (-1.5%), MARUTI (-1.2%), and BAJAJ-AUTO (-1.2%) topped the losers. Among the sectoral indices, METAL (+3.3%), PSU BANK (+3.2%), and FINANCIAL SERVICES 25/50 (+2.9%) led the gainers. AUTO (-0.7%) was the only index to close in the red.

Excerpts of an interview with Mr. Abhijit Roy, MD &CEO, Berger Paints (BERGEPAINT) with CNBC TV18 on 2nd March 2021:

  • In 3QFY21, BERGEPAINT reported a 32% rise in volumes. The demand scenario is quite similar to 3QFY21 and with a low base of 4QFY20, the company expects to report strong growth in 4QFY21.
  • The management expects good growth from the waterproofing business and construction chemicals.
  • A part of the volume growth was partly on account of pent-up demand.
  • There is a shift towards premium and luxury categories which were suffering in the initial Covid-19 days. Overall, the demand scenario is strong, though 30%+ growth may not be sustainable.
  • There has been an increase in input costs, especially for solvent-based products and the industrial segment is affected. To compensate for the higher input costs, they have received price hikes from some customers. Discussions with some clients regarding price hikes is still pending.
  • The impact of cost hikes has been lesser on the decorative paints. The management expects an impact on gross margins but EBITDA margins are expected to be retained on account of cost-saving measures undertaken. The management believes a price hike may have to be taken for decorative paints as well if the material cost uptrend continues.
  • The company is currently operating at ~95% of its capacity due to the uptick in volumes. Hence, they are undertaking both brownfield and greenfield expansion projects. A new plant at Lucknow is being commissioned for ~Rs 7,000 mn. The new plant is expected to be operational by Jan 22.
  • The decorative paints segment is growing at a faster rate compared to Automobiles. The Auto segment is a mixed bag, with Commercial vehicles, and Tractors doing well and passenger vehicles and 2-wheeler lacking compared to expectations.
  • The protective coatings category is growing in double digits, albeit at a slower pace compared to decorative and automotive.
  • The premium category has picked up significantly after Oct-20.

Asset Multiplier Comments

  • The paint companies reported strong growth in the decorative paints segment due to pent-up demand, delayed festive season, strong momentum in tier 3-4 markets, and share gains from small, unorganized players.
  • The weak macro environment impacted the industrial coatings while auto coatings did well. The auto coatings recovery was in line with the recovery in the Passenger and Commercial vehicles.
  • We believe as the metros and cities return to normalcy, the premiumisation trend will be stronger.

Consensus Estimate: (Source: market screener website)

  • The closing price of BERGEPAINT was ₹ 729/- as of 03-March-2021. It traded at 101x/ 77x/ 65x the consensus earnings estimate of ₹ 7.2/ 9.5 /11.3 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 620 implies a PE multiple of 55x on FY23E EPS of ₹ 11.3/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Berger Paints, Paints , 0 Comments Read more...
15 Dec

Expecting double-digit growth YoY in 3QFY21 – Berger Paints

Update on Indian equity market:
Markets started the week on a higher note as Nifty closed the day 44 points higher at 13,571. Within the index, ONGC (5.9%), LT (4.3%), and CIPLA (4.1%) led the index higher while EICHERMOT (-2.5%), HEROMOTOCO (-2.2%), and M&M (-2.0%) were the highest losers. Nine out of 11 sectoral indices were in the green with MEDIA (2.0%), PSU BANK (1.8%), and METAL (1.4%) leading the pack while AUTO (-1.0%) and REALTY (-0.9%) were the only losers.
Excerpts of an interview with Mr. Abhijeet Roy, Chief Operating Officer, Berger Paints (Berger) published on CNBC-TV18 dated 11th December 2020:
The demand scenario in the month of October and November was robust. The company is witnessing a similar trend in December. He expects the volumes to report double-digit YoY growth in 3QFY21E.
Demand from the auto segment surged ahead of the festive season. The demand has softened in the month of December.
The decorative segment has seen robust demand right from 2QFY21 and continues to do well in the month of December.
To meet the ever-increasing demand for its products, the company is putting up a new plant at Lucknow. The initial plan was to have Rs 2,600-2,700 mn of investment in capacity expansion. The same has been ramped up to beyond Rs 4,500mn looking at the demand scenario.
He said that the costs are going up for some raw materials, specifically for monomers. The margins are expected to be under pressure in 4QFY21E.
He said that the company reported the fastest growth in the industry and as a result, gained market share. With the ever-increasing demand scenario, he is confident of continuing the momentum.
Consensus Estimate: (Source: market screener website)
The closing price of Berger was ₹ 681/- as of 14-Dec-2020. It traded at 102x/ 75x/ 63x the consensus EPS estimate of ₹ 6.7/ 9.1/ 10.8 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 551/- implies a P/E multiple of 51x on FY23E EPS of ₹ 10.8.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Paints , , 0 Comments Read more...