Berger Paints Ltd - REDUCE - TP Rs.265 - Result Update - Kotak

High single digit YoY volume growth in the decorative paint segment as well as the industrial segment has translated into revenue of Rs 12.82 bn (+11.8% YoY and + 2.8% QoQ) for Berger. Low growth despite near normal monsoon, onset of festive season from October and latent demand post GST implementation is a sign of losing market share for Berger. Higher raw material prices and higher employee cost impacted the Ebidta margins at 15.5% (+70 bps and -10 bps YoY). Consequently, PAT was reported at Rs 1.11 bn (+18% YoY and -1.2% QoQ), lower than our estimate of Rs 1.22 bn. We interpret the performance as weak especially when we consider the fact that the stock trades at premium valuation. However, we remain confident of strong paint demand to continue with favourable demographics, strong automotive demand, pick-up in capex cycle and housing for all scheme of the government. Downgrade the stock to REDUCE (from Accumulate) with a TP of Rs 265 at 46x FY19E primarily due to stretched valuations.

Shares of BERGER PAINTS INDIA LTD. was last trading in BSE at Rs.249.4 as compared to the previous close of Rs. 248.75. The total number of shares traded during the day was 46482 in over 752 trades.

The stock hit an intraday high of Rs. 253.4 and intraday low of 246.55. The net turnover during the day was Rs. 11593559.

Source : Equity Bulls

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