Buy Berger Paints (India), target Rs 332: Edelweiss Financial Services

Edelweiss Financial Services has buy call on Berger Paints (India) Ltd. with a target price of Rs 332.0 . The current market price of Berger Paints (India) Ltd. is Rs 285.55 Time period given by the brokerage is a year when Berger Paints (India) Ltd. price can reach the defined target. Berger Paints (India) Ltd., incorporated in 1923, is a largecap company with a market cap of Rs 27737.51 crore.

Investment rationale by Edelweiss
Berger Paints' (Berger) 16.7% YoY revenue growth came in line, whereas 24.2% YoY EBITDA surge surpassed our estimate. Domestic volume growth remained strong at ~13% YoY on a base of 10%, beating our ~8-9% estimate (Asian Paints reported decorative volume growth of ~11% YoY).


Consolidated gross margin contracted 85bps YoY owing to spike in input cost, though price hikes (~1.5% in March 2018 and ~2.1% in May 2018) have brought some relief. We believe, Berger has gained some market share during the quarter considering its volume growth being higher than that of the industry. We envisage bounce back in decorative volumes and price hikes to aid overall revenue and earnings spurt. Hence, we raise our target multiple from 38x to 42x FY20E EPS and arrive at revised TP of INR332 (earlier INR293). Maintain ‘BUY’.