Good show. Berger reported 9% yoy growth in revenues (6.5% organic), 33% growth in EBITDA and 13% growth in net profit. We increase our FY2021E EPS by 12% as we incorporate better-than-estimated recovery in the business and raise FY2022-23E EPS by 5%. We rollover and revise FV to Rs 505 (from Rs 410) valuing Berger at 45X Dec-22E
earnings. Berger is executing well, marginally ahead of peers, but we stay cautions as valuations are rich on absolute as well as relative basis. Sell.
Berger reported about 6.5% yoy growth in consolidated revenues (organic; we estimate 250 bps contribution of STP acquisition), 33% growth in EBITDA and 40% decline in PBT. Standalone revenues grew 7% yoy; per our estimate, domestic decorative paints volume grew 17% yoy (versus 11%/15% for APNT/KNPL) and value growth was about 8% (versus 6%/7%growth for APNT/KNPL).
Key takeaways, Decorative paints value growth was flat in the month of July and in double digits in the month of
August and September. Growth accelerated further in October, Berger Nippon JV in auto coatings is doing well
and has managed to win many new Auto OEM logos, RM prices have inched up but the management is confident of
stable/improving gross margin and EBITDA margin in 3Q and 4Q .
Operating leverage would aid EBITDA margin in 2HFY21, growth was driven by tier 2 and tier 3 towns whereas
tier 1 cities are to recover to pre-Covid levels, salience of low-margin products wes higher in 1Q . Premium/luxury
products were up in October. Berger has increased capex for the upcoming plant at Lucknow to about Rs 450 cr. This plant will be commissioned by December 2021. Berger’s capacity utilization was 93-94% in October; the management has the option to quickly ramp up the brownfield capacity.
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