Dolat Capital is bullish on Berger Paints and has recommended accumulate rating on the stock with a target of Rs 215 in its February 6, 2013 research report.
“Berger Paints, decorative business growth remains strong. We estimate a volume growth of 9% during Q3FY13. The company has gained market share. Industrial business continues to face headwinds on account of slowdown in auto and lower infrastructure spends. Domestic business gross margin expanded by 199bps YoY. Improvement was mainly on account of: 1) Lower RM cost, 2) favorable product mix 3) lower share of Industrial paints. Initial response to the new ad campaign for “Berger Silk” brand has been encouraging. The company has aggressively expanding its reach and has increased the number of dealers with tinting machine to 9500 up 14% YoY. International business reported strong growth especially in the Nepal region while in Bolix the focus was more on improving operating performance.”
“Management is confidents of sustaining the improvement in operating performance in the international business. We remain positive on Berger Paints as company plans to expand its presence in the high margin emulsion paints. We expect the Berger Paints P/E multiple to expand on back of improvement in margins. Berger Paint P/E discount to Asian Paints has narrowed with improvement in operating performance and the trend is expected to continue. We have upgraded our estimates by 4-5% to factor better operating margin in domestic and international business. We maintain and Accumulate rating and upgrade our price target to Rs 215 (23x FY15E). The stock trades at 24x FY14E EPS of Rs7.8 and 20x FY15E EPS of Rs9.4,” says Dolat Capital research report.
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