Berger Paints India - Q1FY21 Result Update - ICICI Securities

Berger Paint's Q1FY21 performance was largely marred by lockdown in the domestic and overseas business. Domestic business (~87% of consolidated sales) recorded ~48% fall in topline mainly due to washout April 2020 sales. However, post easing of lockdown restrictions, Berger saw ~90% sales recovery in May 2020 and reported double digit volume/value growth in June 2020 supported by pent up demand. Demand was largely driven by suburban and rural India where the impact of pandemic was limited. However, demand from metro regions remained impacted due to extended/intermediary lockdowns. On the subsidiary front, BJN Nepal was severely impacted by lockdown as it had only 10 working days in the quarter. However, Poland subsidiary Bolix SA exhibited an improved topline performance due to the nature of the business, which involves application of external insulation on building sites. On the raw material front, gross margin fell 266 bps QoQ (flat YoY) mainly due to a change in product mix, adverse current movement and price cut taken in the last 10-month period. Going forward, the management saw good demand traction in decorative paints post ease in lockdown restrictions (in July-August 2020) and expects a strong recovery in demand from Q3FY21 onwards. While we stay positive on the stock, we believe at CMP the stock captures all near term positives.

Valuation & Outlook

Berger Paint is likely to report strong earning CAGR of 20% in FY20-22E supported by a recovery in demand and elevated margins (backed by benign raw material prices). We maintain our HOLD rating with a revised target price Rs. 580/share, considering the current price captures all near term positives.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_BergerPaints_Q1FY21.pdf

Shares of BERGER PAINTS INDIA LTD. was last trading in BSE at Rs.562.7 as compared to the previous close of Rs. 541.6. The total number of shares traded during the day was 187469 in over 6502 trades.

The stock hit an intraday high of Rs. 567.85 and intraday low of 541. The net turnover during the day was Rs. 104918481.

Source : Equity Bulls

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