Berger Paints Q1 Results Review - Margin Improvement Ahead Of Estimate; Maintain 'Accumulate': Dolat Capital
Subsidiary performance was a mix bag.
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Dolat Capital Report
Berger Paints India Ltd.’s Q1 FY24 revenues came in line but Ebitda and adjusted profit after tax were ahead. Volume growth in decorative business stood at 14.0% (versus +10% for Asian Paints Ltd.). On a five-year compound annual growth rate basis, revenue increased 18.9%.
Gross margin expanded by 410 basis points to 39.8% was lower than 520 bps gain for Asian Paints. The company has gained from the benefits of deflationary price environment.
Going ahead, we believe stable raw material cost environment would help the company to maintain gross margin at higher levels.
Being the second-largest company in the domestic decorative industry, Berger is likely to benefit further from-
rising distribution reach,
strong presence in urban markets and
attractive product offering across all categories.
We have upward revised our FY24/25E earnings per share by 0.7/0.6% to Rs 12.7/15.0 to factor in improvement in margins. Valuing the stock at 50 times FY25E EPS (10% discount to Asian Paints valuations) to arrive at target price of Rs 749. Maintain 'Accumulate'.
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