Berger Paints - Q4FY20 First Cut - ICICI Securities

(CMP: Rs. 516; MCap: Rs. 50,066 crore)

Berger paints performance was lower than our estimates mainly due to higher than expected revenue loss in the month of March'20 owing to lockdown. Company benefited from benign raw material prices and lower tax rate.

Q4FY20 Earnings Summary

- Company has lost revenue for almost 10 days in Q4FY10 due to lockdown, resulting ~8% YoY dip in consolidated revenue to Rs. 1355 crore (I-direct estimate: Rs. 1495 crore). The standalone revenue declined by ~13% YoY to Rs. 1175 crore, whereas revenue from subsidiaries grew by ~51% YoY due to acquisition of STP Ltd during Q3FY20

- Berger paint reported a strong gross margin expansion by ~370 bps YoY (280 bps QoQ) led by benign raw material prices and change in product mix. However, the better gross margin was completely offset by sharp increase in employee cost and other expenses (up by ~200 bps and 160 bps YoY respectively), resulting in flattish EBITDA margin at 15.4% (I-direct estimate: 15.6%)

- PBT declined by ~11% YoY to Rs. 162 crore, sharp decline in tax provision (down by ~22% YoY) restricted decline in PAT by ~7% YoY at Rs. 103 crore (Vs I-direct estimate Rs. 134 crore)

We believe a gradual recovery in the demand of decorative paints from 2HFY21. Regions such as East and South India are witnessing faster recovery in demand of paints post lockdown. Berger being a dominant player in these regions would benefit from faster demand recovery and thus recoup its lost sales.

Shares of BERGER PAINTS INDIA LTD. was last trading in BSE at Rs.544.85 as compared to the previous close of Rs. 515.5. The total number of shares traded during the day was 251713 in over 9036 trades.

The stock hit an intraday high of Rs. 551.4 and intraday low of 515. The net turnover during the day was Rs. 135673125.

Source : Equity Bulls

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