Berger Paints India Ltd.

In s t itu tio n a l E q u it ie s

3QF

Y22

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Reuters: BRGR.NS; Bloomberg: BRGR IN

Berger Paints India Ltd.

Strong volume growth but still lags leader; New peers pose near-term challenge Berger Paints India Ltd. (BRGR) posted a reasonably good volume growth in 3QFY22, but was behind the market leader. Volume growth for the standalone business stood at ~12% YoY [we believe domestic decorative (Dom-Deco) volume to be higher at ~14% vs our est. of ~13%). On a 2-year CAGR basis, Dom-Deco volume growth for the top two players grew by >20% in 3QFY22, but we believe that BRGR lagged the market leader by 2-3%. BRGR witnessed a decent standalone value growth of 21% YoY (2-year CAGR: 22.6%), but it was lower than our estimate. The bigger disappointment in 3QFY22 was the margin performance. In 3QFY22, there was actually a sequential deterioration in margin as the benefit of lower cost purchases had played out fully in 2QFY22 and the effect of price increase taken in the latter half of 3QFY22 was only partially realized. Going forward, if RM prices drop marginally, the company won’t cut prices immediately. However, for the next 3-6 months, the management doesn’t believe that RM prices will fall significantly. Overall demand has been reasonably strong. Rural demand optically has moderated due to a high base whereas urban demand has bounced back for the paint industry. From a domestic decorative paint industry perspective, it is interesting to note that price hikes taken in Oct’21/Nov’21 were easily absorbed and further steep price hikes in Nov’21/Dec’21 also did not result in any demand slowdown in Jan’22/Feb’22. Demand for automotive paints is closer to normalcy. Some element of pent-up demand may come back in the coming few months. Changes to our model have led to a sharp cut in our near-term margins due to RM cost pressure. Over FY21-24E, we now expect BRGR to deliver strong Revenue/EBITDA/APAT CAGR of 19%/22.3%/25.4%, led by (a) continued growth witnessed by the organized decorative paints industry from tier II/III cities & upcountry markets, where the company has a higher exposure than industry (b) pick-up in urban markets (c) product portfolio & distribution expansion (c) higher growth in premium decorative products (d) pick-up in GDP growth (e) non-decorative segments & subsidiary businesses growing faster going forward and (f) ~150bps improvement in operating margin, largely led by price hikes, COGS efficiencies initiatives, better mix and cost rationalization across line items. New competition in the Dom-Deco market may be challenging in the short run and will be a very key monitorable. After the recent price correction (~10% post the 2QFY22 results), the stock now trades at 59.7x/49.1 FY23E/FY24E EPS. Targeting an unchanged multiple of ~55x (~10% discount to market leader), we get a slightly revised target price of Rs735 (Rs740 earlier). We thus upgrade our rating to Accumulate from Sell earlier.

3QFY22 consolidated headline performance: Revenue grew by 20.4% YoY to Rs25.5bn (vs est. of Rs27.7bn). Gross margin was down by 760bps YoY at 36.7% (-160bps QoQ; vs est. of 41%). Operating expenses were lower than our estimates. As a % of revenue, other expenses and employee costs were down 260bps and 70bps YoY, respectively. EBITDA margin was down 420bps YoY at 15.4% vs our est. of 18.5%. EBITDA declined by 5.5% YoY to Rs3.9bn (vs est. of Rs5.1bn). Adjusted PAT (APAT) was down 8% YoY at Rs2.5bn (vs est. of Rs3.5bn).

Standalone 3QFY22 revenue grew by 21.2% YoY whereas EBITDA & APAT declined by 9.1% YoY & 13.1% YoY, respectively. Gross margin was down 770bps YoY at 36% while EBITDA margin was down 510bps YoY at 15.2%.

Performance of international & subsidiary business: Imputed subsidiary revenue grew by 14.9% YoY. BJN Nepal, Bolix SA, SBL Special Coatings Pvt Ltd and STP, all had a strong quarter on the revenue front.

9MFY22 consolidated Revenue, EBITDA and APAT grew by 37.2% YoY, 16.9% YoY and 19.8% YoY, respectively. Gross margin was down 530bps YoY at 37.7% while EBITDA margin was down 260bps YoY at 15%.

Highlights from the earnings call: (1) RM inflation was 28-29% over the last year but was relatively lower in the decorative business than in the industrial segment. Inflation was mainly seen in monomers (butyl acrylate in particular, which goes into emulsion production), solvents, phthalic anhydride, vegetable oil, etc. Crude has jumped further in Jan’22, which may affect some RMs like solvents, phthalic anhydride, monomers, etc. in the near term. (2) The company had taken 24-25% price hike in the Dom-Deco business in CY21 with bulk of the hikes taken in 3QFY22. It is in the process of taking further price hike in the industrial segment (~19% of total business) in 4QFY22. If this goes through as well, gross margin should be back to prior level in the future. (3) The management stated that discounting/rebating has been a little abnormal in certain categories where BRGR has responded less aggressively.

ACCUMULATE (UPGRADE)

Sector: Paints

CMP: Rs718

Target Price: Rs735

Upside: 2%

Vishal Punmiya Research Analyst [email protected] +91-22-6273 8064

Videesha Sheth Research Associate [email protected] +91-22-6273 8188

Key Data

Current Shares O/S (mn) 971.3

Mkt Cap (Rsbn/US$bn) 705.9/9.4

52 Wk H / L (Rs) 873/675

Daily Vol. (3M NSE Avg.) 691,706

Price Performance (%)

1 M 6 M 1 Yr

Berger Paints India (7.3) (10.4) (4.7)

Nifty Index (2.5) 8.1 16.0

Source: Bloomberg

FY21 Annual Report

3QFY22 Investor Presentation

Y/E March (Rs. Mn) 3QFY21 2QFY22 3QFY22 YoY (%) QoQ (%) 3QFY20 v 3Q20 (%) 9MFY21 9MFY22 YoY (%)

Net Sales 21,182 22,250 25,508 20.4 14.6 16,959 50.4 47,915 65,743 37.2 COGS 11,812 13,727 16,153 36.7 17.7 10,039 60.9 27,276 40,927 50.0 Gross margin % 44.2 38.3 36.7 -7.6 -1.6 40.8 -4.1 43.1 37.7 -5.3 Employee costs 1,281 1,419 1,360 6.2 -4.2 1,047 30.0 3,584 4,090 14.1 % of sales 6.0 6.4 5.3 -0.7 -1.0 6.2 -0.8 7.5 6.2 -1.3 Other expenses 3,939 3,564 4,074 3.4 14.3 2,910 40.0 8,633 10,880 26.0 % of sales 18.6 16.0 16.0 -2.6 0.0 17.2 -1.2 18.0 16.5 -1.5 EBITDA 4,150 3,540 3,921 -5.5 10.8 2,963 32.3 8,423 9,846 16.9 EBITDA margin % 19.6 15.9 15.4 -4.2 -0.5 17.5 -2.1 17.6 15.0 -2.6 Depreciation 529 559 561 6.0 0.3 483 16.1 1,570 1,668 6.3 EBIT 3,621 2,981 3,361 -7.2 12.7 2,480 35.5 6,853 8,179 19.3 EBIT margin % 17.1 13.4 13.2 -3.9 -0.2 14.6 -1.4 14.3 12.4 -1.9 Interest expense 89 127 139 56.1 9.2 127 9.5 322 361 12.2 Other income 156 130 155 -1.0 18.9 143 8.3 466 455 -2.4 PBT 3,689 2,984 3,377 -8.5 13.2 2,496 35.3 6,998 8,272 18.2 Tax 949 792 842 -11.3 6.3 637 32.1 1,841 2,132 15.8 Effective tax rate % 25.7 26.5 24.9 -0.8 -1.6 25.5 -0.6 26.3 25.8 -0.5 Adj. PAT 2,748 2,189 2,527 -8.0 15.5 1,824 38.6 5,112 6,122 19.8 Adj. PAT margin % 13.0 9.8 9.9 -3.1 0.1 10.8 -0.8 10.7 9.3 -1.4 EPS 2.8 2.3 2.6 -8.0 15.5 1.9 38.6 5.3 6.3 19.8

Source: Company, Nirmal Bang Institutional Equities Research

11 February, 2022

https://www.bseindia.com/xml-data/corpfiling/AttachLive/050f039c-08c6-49c9-a1ed-3059f6228844.pdf

https://www.bseindia.com/xml-data/corpfiling/AttachLive/050f039c-08c6-49c9-a1ed-3059f6228844.pdf

https://www.bseindia.com/xml-data/corpfiling/AttachLive/ddbc0ead-5aeb-4b7c-b56b-7edd4e9f5e0a.pdf


2 Berger Paints

Exhibit 1: Financial summary

Y/E March (Rsmn) FY20 FY21 FY22E FY23E FY24E

Net sales 63,658 68,176 91,046 1,04,092 1,14,943

YoY growth (%) 5.0 7.1 33.5 14.3 10.4

EBITDA 10,610 11,880 14,168 18,249 21,726

EBITDA margin (%) 16.7 17.4 15.6 17.5 18.9

Adj. PAT 6,578 7,198 8,850 11,679 14,200

EPS 6.8 7.4 9.1 12.0 14.6

YoY change (%) 33.1 9.4 22.9 32.0 21.6

ROCE* (%) 30.4 29.5 29.4 32.7 35.2

ROE (%) 25.8 23.8 24.2 27.3 28.0

ROIC* (%) 33.2 32.9 33.5 39.8 47.6

P/E (x) 106.0 96.9 78.8 59.7 49.1

P/B (x) 26.2 20.6 17.8 15.0 12.7

EV/EBITDA (x) 66.0 58.6 49.5 37.9 31.5

Source: Company, Nirmal Bang Institutional Equities Research; Note: ROCE & ROIC are on pre-tax basis

Exhibit 2: Our estimates versus actual performance

Y/E March (Rsmn) 3QFY21 2QFY22 3QFY22 YoY (%) Q-o-Q (%) NBIE Estimates Deviation (%)

Net sales 21,182 22,250 25,508 20.4 14.6 27,733 -8.0

EBITDA 4,150 3,540 3,921 -5.5 10.8 5,131 -23.6

EBITDA (%) 19.6 15.9 15.4 -4.2 -5.4 18.5 -3.1

PAT 2,748 2,189 2,527 -8.0 15.5 3,455 -26.8


Exhibit 3: Common-size P&L over the quarters

Particulars (%) 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22 3QFY22

Gross margin 40.8 43.6 41.0 42.8 44.2 43.7 38.6 38.3 36.7

Staff Cost 6.2 9.1 12.5 6.5 6.0 6.3 7.3 6.4 5.3

Other expenses 17.2 19.1 18.6 17.0 18.6 20.9 18.0 16.0 16.0

EBITDA 17.5 15.4 9.9 19.2 19.6 16.6 13.3 15.9 15.4

EBIT 14.6 11.7 4.5 16.2 17.1 13.9 10.2 13.4 13.2

PBT 14.7 11.9 4.0 16.9 17.4 14.0 10.6 13.4 13.2

Adjusted PAT 10.8 7.7 1.7 12.7 13.0 10.3 7.8 9.8 9.9


Exhibit 4: Change in our estimates

Y/E March Earlier Estimates New Estimates Change (%)

(Rs mn) FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E

Net Sales 93,114 1,03,042 1,12,898 91,046 1,04,092 1,14,943 -2.2 1.0 1.8

EBITDA 16,311 19,608 22,012 14,168 18,249 21,726 -13.1 -6.9 -1.3

EBITDA margin (%) 17.5 19.0 19.5 15.6 17.5 18.9 -2.0 -1.5 -0.6

Adj PAT 10,407 12,763 14,450 8,850 11,679 14,200 -15.0 -8.5 -1.7



3 Berger Paints

Exhibit 5: Standalone quarterly performance

Particulars (Rs. Mn) 3QFY21 2QFY22 3QFY22 YoY (%) QoQ (%) 3QFY20 v 3Q20 (%) 9MFY21 9MFY22 YoY (%)

Revenue 18,619 19,377 22,562 21.2 16.4 15,018 50.2 23,625 35,569 50.6

COGS 10,475 12,065 14,437 37.8 19.7 8,918 61.9 13,807 22,121 60.2

% of sales 56.3 62.3 64.0 7.7 1.7 59.4 4.6 58.4 62.2 3.8

Gross margin % 43.7 37.7 36.0 -7.7 -1.7 40.6 -4.6 41.6 37.8 -3.8

Employee costs 918 1,054 983 7.1 -6.7 839 17.2 1,700 2,039 19.9

% of sales 4.9 5.4 4.4 -0.6 -1.1 5.6 -1.2 7.2 5.7 -1.5

Other expenses 3,444 3,218 3,706 7.6 15.1 2,655 39.6 3,969 6,161 55.2

% of sales 18.5 16.6 16.4 -2.1 -0.2 17.7 -1.3 16.8 17.3 0.5

EBITDA 3,782 3,040 3,436 -9.1 13.1 2,606 31.9 4,149 5,247 26.5

EBITDA margin % 20.3 15.7 15.2 -5.1 -0.5 17.4 -2.1 17.6 14.8 -2.8

Depreciation 468 489 494 5.6 1.0 429 15.0 917 964 5.1

EBIT 3,314 2,550 2,942 -11.2 15.4 2,177 35.2 3,232 4,284 32.5

EBIT margin % 17.8 13.2 13.0 -4.8 -0.1 14.5 -1.5 13.7 12.0 -1.6

Interest expense 62 110 123 97.4 12.4 88 39.5 178 189 6.1

Other income 152 142 140 -8.0 -1.3 138 1.1 205 302 47.5

PBT 3,404 2,582 2,959 -13.1 14.6 2,227 32.9 3,259 4,397 34.9

Tax 868 664 756 -12.9 13.8 571 32.5 834 1,128 35.3

Effective tax rate % 25.5 25.7 25.6 0.1 -0.2 25.6 -0.1 25.6 25.7 0.1

Adj. PAT 2,536 1,918 2,203 -13.1 14.9 1,656 33.0 2,425 3,269 34.8

Adj. PAT margin % 13.5 9.8 9.7 -3.8 -0.1 10.9 -1.2 10.2 9.1 -1.1

EPS 2.6 2.0 2.3 -13.1 14.9 1.7 33.0 2.5 3.4 34.8


Exhibit 6: Imputed subsidiary performance

Particulars (Rs. Mn) 3QFY21 2QFY22 3QFY22 YoY (%) QoQ (%) 9MFY21 9MFY22 YoY (%)

Revenue (Rsmn) 2,563 2,874 2,945 14.9 2.5 24,290 30,174 24.2

as a % of consol. sales 12.1 12.9 11.5 -0.6 -1.4 50.7 45.9 -4.8

EBITDA (Rsmn) 368 500 485 31.8 -3.1 4,274 4,599 7.6

EBITDA margin (%) 14.4 17.4 16.5 2.1 -1.0 17.6 15.2 -2.4

PAT (Rsmn) 212 271 324 52.8 19.8 2,686 2,853 6.2



4 Berger Paints

Exhibit 7: Volume growth of standalone business stood at 12% in 3QFY22 and within that, we believe domestic decorative business would have registered a volume growth of 14% YoY (2-yr CAGR: ~23%)

-60.0

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Quarterly volume growth (%) (our est.)

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Exhibit 8: Standalone sales grew 21.2% YoY to Rs22.6bn

Exhibit 9: Consolidated revenue grew 20.4% to Rs25.5bn

14.6

13.5

15.9

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15.0

11.7

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18.6

18.0

16.2

19.4

22.6

21.0 13.2 15.5 7.5 2.9-13.2

-47.9

7.424.0

53.0

96.0

26.1 21.2

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Standalone Revenue (Rsbn) Growth (%)

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16.2

14.7

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9.3

17.4

21.2

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18.0

22.3

25.5

20.813.4 15.7

7.3 4.9-8.0

-45.8

9.024.9

49.5

93.2

27.720.4

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3QFY

22Consolidated Revenue (Rsbn) Growth (%)

(%)(Rsbn)

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 10: Standalone gross margin stood at 36% (down ~770bps YoY)

Exhibit 11: Consolidated gross margin stood at 36.7% (down ~760bps YoY)

36.8

39.2

40.2

40.1

40.6

42.9

40.2

42.3

43.7

43.8

37.9

37.7

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Standalone Gross Margin

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37.8

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43.6

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42.8

44.2

43.7

38.6

38.3

36.7

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5 Berger Paints

Exhibit 12: Standalone EBITDA margin stood at 15.2% (down ~510bps YoY)

Exhibit 13: Consolidated EBITDA margin stood at 15.4% (down ~420bps YoY)

15.3

16.0

18.1

15.4

17.4

16.2

13.7

19.6

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16.8

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Standalone EBITDA Margin

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15.5

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17.8

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9.9

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15.9

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Consolidated EBITDA Margin

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Exhibit 14: Consolidated EBITDA declined 5.5% YoY to Rs3.9bn

Exhibit 15: Consolidated APAT was down 8% to Rs2.5bn

2.5

2.3

3.1

2.5

3.0

2.1

0.9

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3.4

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12.4 12.734.4 21.4 18.4

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Consolidated EBITDA (Rsbn) Growth (%)

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1.3

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1.8

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2.7

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2.1 4.3 31.0 66.2 36.9 -6.4-91.3

13.3 50.7101.1

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Exhibit 16: One year forward P/E

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Forward PE 5 yr Median SD -1 SD +1

(x)

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67.4

60.9

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Note: Feb’22 valuation based on closing price of 11th Feb’22


6 Berger Paints

Berger Paints (BRGR) 3QFY22 interview, earnings call and presentation highlights:

Highlights from Mr. Abhijit Roy’s interview on CNBC TV18 on 10th Feb’22

BRGR witnessed a reasonably good quarter with decent value growth of 21% YoY (>25% 2-year CAGR). But, operating margin suffered because of high RM prices.

The company stated that price hike taken in Oct’21/Nov’21 was absorbed. It had taken steep price hikes in Nov’21/Dec’21 and despite that, it did not see any slowdown in demand in Jan’22/Feb’22.

If RM prices drop marginally, the company won’t cut prices immediately. However, for the next 3-6 months, the management doesn’t believe that RM prices will fall significantly.

Overall demand has been reasonably strong. Rural demand has optically slowed due to a high base whereas urban demand has bounced back for the paint industry. 1QFY23 is likely to post good performance.

Demand for automotive paints is closer to normalcy.

Some element of pent-up demand may come back in the coming few months.

New competition may be challenging in the short run, but BRGR will continue to focus on its customers and consumers.

Business and demand environment

Metros and larger towns indicated a strong post-covid bounce back.

Newer products like high-end water-based primers, admixtures, construction chemicals etc did particularly well. Advertised products (emulsions, primers) showed significant growth above the business average. Putty & powder paints grew at a relatively lower pace.

BRGR has not seen any downtrading so far; instead, product mix has improved in all markets.

Industrial paints:

a. Two-wheelers for the bulk of auto business for BRGR (auto business forms a part of the standalone business)

b. Growth in automotive business was muted compared to other industrial business in 3QFY22. c. Protective and Infrastructure coatings business showed robust YoY growth.

Network expansion

a. The company remains optimistic about its network expansion. b. Most of the network expansion is in non-tier-1 cities.

c. Selling paints through cement shops is not very seamless, but there is an opportunity from the same (even BRGR has tried selling through cement dealers).

d. The company is seeing credit period norms being extended in the industry, although BRGR has not deviated from its policy.

e. Tinting machines are given on upfront cash basis as well as on credit with a volume sales target.

Comments on competition:

a. BRGR’s standalone volume & value growth also include 20% of the industrial business. Purely on domestic decorative front, BRGR’s growth is not far behind the leader. Further in 3QFY21, there was a fair number of supply-apply contracts making the base heavy. Adjusted for both, BRGR’s growth is not far away from the leader.

b. The management stated that the recent entrant in decorative paints has also become aggressive. c. The company is keeping an eye on all the three new players.

Performance of international & subsidiary business

BJN Nepal continued with strong topline and profitability delivery.

BRGR’s wholly-owned Polish subsidiary Bolix S.A also had a quarter of strong topline growth.

SBL Specialty Coatings (erstwhile Saboo Coatings) and STP Ltd. also recorded strong topline performance with profitability affected by higher raw material prices. However, some price negotiations with customers have been taken and some are underway.

The company’s wholly-owned subsidiary BPOL, Russia’s 3QFY21 numbers had been affected by mark-to-market fluctuations on foreign exchange loan. There was no significant mark-down in 3QFY22 having a beneficial impact on the profitability growth numbers.

Margins for subsidiaries will improve going forward.

The company’s JV, Berger Becker Coatings Ltd. also showed improved performance in 3QFY22. While some price hike has already been taken, more hikes are planned for 4QFY22. Thus, margins will improve going forward.


7 Berger Paints

Financial performance and guidance

Raw material inflation, price increases and margins:

a. Gross margin declined (YoY & QoQ) because the benefit of lower cost purchases had played out fully and the effect of price increase in 3QFY22 was only partially realized. Vendor development and reformulation activities helped offset some negative impact of inflation. Better mix in domestic-decorative business also aided in offsetting the adverse impact of inflation. However, the full impact of price hike both in decorative as well as industrial businesses will kick in from 4QFY22 onwards.

b. RM inflation was 28-29% over the last year (15-16% as a % of sales) and was relatively lower in the decorative business than in industrial. Inflation was mainly seen in monomers (butyl acrylate in particular, which goes into emulsion production), solvents, phthalic anhydride, vegetable oil etc.

c. RM continues to remain elevated. Crude has jumped further in Jan’22, which may affect some RMs like solvents, phthalic anhydride, monomers etc.

d. The company had taken 24-25% price hike in the decorative business in CY21 with bulk of the increases taken in 3QFY22. Industrial business (especially 2-wheelers) needs price increase beyond what is taken in decorative. The company is in the process of taking further price hike in industrial (19% of total business) in 4QFY22. If this goes through (along with hike taken in 3QFY22), gross margin will be back to prior level in the future.

e. The management stated that discounting/rebating has been a little abnormal in certain categories where BRGR has responded less aggressively. However, the company will do whatever it takes to retain market share going ahead.

f. Currently, BRGR has RM & finished goods stock of less than two months

For supply-apply contracts, other expenses get inflated (due to labour & other costs), and RM forms lower % of contract value (sales).

UP plant is on track. The sunset clause for the subsidy is valid till Jan’23 and the plant will be operational by mid-CY22.


8 Berger Paints

Financials (Consolidated)

Exhibit 17: Income statement


Net Sales 63,658 68,176 91,046 1,04,09

2 1,14,94

3

% Growth 5.0 7.1 33.5 14.3 10.4

COGS 37,258 38,686 55,993 60,374 64,943

Staff costs 4,525 4,851 5,690 7,078 7,931

Other expenses 11,265 12,759 15,194 18,391 20,343

Total expenses 53,048 56,296 76,878 85,843 93,217

EBITDA 10,610 11,880 14,168 18,249 21,726

EBITDA margin (%) 16.7 17.4 15.6 17.5 18.9

% growth 13.4 12.0 19.3 28.8 19.1

Other income 685 515 637 833 920

Interest costs 470 441 511 568 376

Depreciation 1,910 2,111 2,256 2,818 3,202

Profit before tax (before exceptional items)

8,915 9,842 12,038 15,695 19,067

Tax 2,271 2,589 3,130 3,955 4,805

Rate of Tax (%) 25.5 26.3 26.0 25.2 25.2

Share from associates/NCI

66 56 59 62 62

Reported PAT 6,578 7,198 8,850 11,679 14,200

Adj PAT 6,578 7,198 8,850 11,679 14,200

Adj PAT margin (%) 10.3 10.6 9.7 11.2 12.4

% Growth 33.1 9.4 23.0 32.0 21.6


Exhibit 19: Balance sheet


Share capital 971 971 971 971 971

Reserves 25,630 32,797 38,284 45,467 54,129

Net worth 26,601 33,769 39,256 46,438 55,100

Minority Interest 71 71 129 191 253

Total debt 5,359 3,838 8,183 5,183 3,183

Lease liabilites 2,310 2,500 2,400 2,304 2,212

Other LT liabilities 483 499 499 499 499

Total liabilities 34,824 40,676 50,467 54,615 61,247

Gross block 18,651 21,694 25,798 30,569 33,473

Depreciation 5,362 7,474 9,730 12,548 15,750

Net block 13,288 14,221 16,069 18,021 17,723

Capital work-in-progress 1,785 1,068 3,464 2,693 1,289

Right of use assets 3,078 3,345 3,278 3,213 3,149

Goodwill 2,790 2,876 2,876 2,876 2,876

Investments 3,152 3,557 3,357 3,857 4,857

Inventories 12,785 16,161 20,656 20,034 21,601

Debtors 7,141 10,197 12,751 12,345 14,108

Cash 2,199 4,396 4,111 10,042 15,346

Other current assets 2,778 3,355 4,627 4,499 5,578

Total current assets 24,903 34,110 42,145 46,920 56,633

Creditors 10,658 14,974 16,627 17,777 19,587

Other current liabilities & provisions

3,513 3,526 4,095 5,188 5,692

Total current liabilities 14,171 18,500 20,722 22,965 25,279

Net current assets 10,732 15,610 21,423 23,955 31,353

Total assets 34,824 40,676 50,467 54,614 61,247


Exhibit 18: Cash flow


PAT 6,206 7,262 8,908 11,740 14,262

Depreciation 1,910 2,111 2,256 2,818 3,202

Other income 282 278 -126 -265 -543

(Inc.)/dec. in working capital -1,152 -1,693 -6,040 3,461 -2,033

Cash flow from operations 7,246 7,958 4,998 17,755 14,889

Capital expenditure (-) -4,310 -1,848 -6,500 -4,000 -1,500

Net cash after capex 2,937 6,110 -1,502 13,755 13,389

Inc./(dec.) in investments 1,672 -1,095 804 302 -108

Cash from investment activities

-2,638 -2,943 -5,696 -3,698 -1,608

Dividends paid (-) -3,816 -291 -3,363 -4,496 -5,538

Others -978 -2,526 3,776 -3,630 -2,439

Cash from financial activities -4,794 -2,818 413 -8,126 -7,977

Opening cash balance 2,385 2,199 4,396 4,111 10,042

Closing cash balance 2,199 4,396 4,111 10,042 15,346

Change in cash balance -186 2,197 -285 5,931 5,304


Exhibit 20: Key ratios

Y/E March FY20 FY21 FY22E FY23E FY24E

Per share (Rs)

EPS 6.8 7.4 9.1 12.0 14.6

Book value 27.4 34.8 40.4 47.8 56.7

DPS 2.6 2.8 3.5 4.6 5.7

Valuation (x)

EV/sales 11.0 10.2 7.7 6.7 6.0

EV/EBITDA 66.0 58.6 49.5 37.9 31.5

P/E 106.0 96.9 78.8 59.7 49.1

P/BV 26.2 20.6 17.8 15.0 12.7

Return ratios (%)

RoCE* 30.4 29.5 29.4 32.7 35.2

RoE 25.8 23.8 24.2 27.3 28.0

RoIC* 33.2 32.9 33.5 39.8 47.6

Profitability ratios (%)

Gross margin 41.5 43.3 38.5 42.0 43.5

EBITDA margin 16.7 17.4 15.6 17.5 18.9

EBIT margin 13.7 14.3 13.1 14.8 16.1

PAT margin 10.3 10.6 9.7 11.2 12.4

Liquidity ratios (%)

Current ratio 1.8 1.8 2.0 2.0 2.2

Quick ratio 0.9 1.0 1.0 1.2 1.4

Solvency ratio (%)

Debt to Equity ratio 0.2 0.1 0.2 0.1 0.1

Turnover ratios

Total asset turnover ratio (x) 1.8 1.7 1.8 1.9 1.9

Fixed asset turnover ratio (x) 3.1 3.0 3.1 3.1 3.3

Inventory days 123 137 120 123 117

Debtors days 40 46 46 44 42

Creditor days 101 121 103 104 105

Source: Company, Nirmal Bang Institutional Equities Research;

*ROCE & ROIC are on pre-tax basis


9 Berger Paints

Rating track Date Rating Market price (Rs) Target price (Rs)

1 September 2020 Sell 538 500


10 November 2020 Sell 654 500

8 January 2021 Sell 793 595

11 February 2021 Sell 772 605

9 April 2021 Sell 762 610

2 June 2021 Sell 794 620

10 August 2021 Sell 811 645


13 November 2021 Sell 795 740

11 February 2022 Accumulate 718 735

Rating chart

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10 Berger Paints

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11 Berger Paints

Disclaimer

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ACCUMULATE -5% to15%

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Berger Paints India Ltd.

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