Berger Paints - Q4FY21 First Cut - ICICI Direct

(CMP: Rs. 833; MCap: Rs. 80,928 crore)

Berger Paints' Q4FY21 results were ahead of our estimate on revenue front whereas below our estimates on earnings.

Q4FY21 Earnings Summary

- Revenue witnessed a growth of 49.5% to Rs. 2026.1 crore (I-direct: 1699.5 crore) led by strong pent up demand & continuation of strong growth trend from Q3FY21. We believe large part of the growth would have been driven by volume growth with limited pricing interventions. Decorative paints category has seen a strong demand conditions in H2FY21E with complete recovery from lockdown disruption in March-June 2020. However, second wave of pandemic would have again disrupted the sales in April-May 2021

- Gross margin have remained flat on YoY basis however contracted by 50 bps on QoQ basis with sharp rise in crude based raw material cost. We believe increase in crude prices in last three months would require price hikes in near term to protect gross margins. The company was able to save 287 bps in employee spend which was partially off-set by higher overhead spends by 176 bps. Operating profit increased by 61% to Rs. 335.6 crore & operating margins improved by 118 bps to 16.6%

- Led by strong operating profit growth & stable depreciation & tax provisioning, net profit grew by 102.2% to Rs. 208.6 crore (I-direct estimate: Rs. 223.2 crore)

Berger paints posted 7% revenue growth for the year despite major disruption in discretionary category sales & specifically paining activity in H1FY21. However, with opening of lockdown resulted in strong pent up demand in H2FY21 resulted in complete sales recovery. Moreover, sharp decline in crude prices & cost cutting measures helped the company to inch operating margins in FY21. We believe second wave of Covid-19 would again disrupt the paints demand in H1FY22 however, expected vaccination drive, slowdown in pandemic spread & subsequent opening up of economic activity would result in skewed sales in H2FY22. However, we believe the company would require price hikes to protect margins given the benefit of lower raw material cost is unlikely in FY22E.

We will be coming out with detailed update soon.

Shares of BERGER PAINTS INDIA LTD. was last trading in BSE at Rs.800.95 as compared to the previous close of Rs. 832.05. The total number of shares traded during the day was 165461 in over 7232 trades.

The stock hit an intraday high of Rs. 838.95 and intraday low of 787. The net turnover during the day was Rs. 132531394.

Source : Equity Bulls

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