Reduce Berger Paints; target of Rs 234: Dolat Capital
Dolat Capital is bearish on Berger Paints and has recommended reduce rating on the stock with a target of Rs 234 in its June 4, 2013 research report.
June 07, 2013 / 12:14 IST
Dolat Capital`s research report on Berger Paints
"We believe Berger Paints would continue to post improvement in operating performance in the coming years as it has increased its focus on high margin water based paints. Our key argument has been narrowing of P/E discount between Berger Paint and Asian Paint on back of improvement in operating performance. The discount in P/E multiple which stood at 31 percent in Q2FY12 has narrowed to 6 percent in Q4FY13.""Consolidated Net sales at Rs 8.1bn (our est of Rs 8.5bn) was up 8 percent. Gross margins expanded by 524bps to 41 percent. EBITDA at Rs 878mn (our est of Rs 979mn) was up 20 percent YoY as margins expanded by 103bps YoY to 10.9 percent (our est of 11.5 percent). PAT at Rs 438mn (our est of Rs 527mn) declined by 1.8 percent YoY. Standalone Net sales at Rs 7.3bn was up 8 percent. Gross margins expanded by 530bps to 40.7 percent. EBITDA at Rs 853mn was up 21 percent YoY as margins expanded by 124bps YoY. PAT at Rs 509mn was up 4 percent YoY. Adjusted for the last year gain in the currency the PBT grew by 14 percent. We estimate decorative paints volume growth of 2 percent.” “We have revised our volume and margin estimate to factor in lower volumes and better operating margin; however our earnings estimate remains unchanged. The stock trades at 31x FY14E EPS of Rs 7.8 and 26x FY15E EPS of Rs 9.3. While remain positive on Paint sector and Berger Paint in particular from a long term perspective, given the sharp run-up in the price and narrowing of P/E discount we downgrade our recommendation from Accumulate to Reduce with a target price of Rs 234,” says Dolat Capital research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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