Berger Paints India is a genuine multi-bagger for investors with the large-cap paint stock returning almost 1,574 percent in the last 10 years. IDFC Securities has maintained 'outperform' rating on Berger Paints India as the company retains focus on core expertise to drive sustainable growth. The brokerage has set a price target of Rs 385 on the stock, which has an upside potential of 5.5 percent from its current market price.
In a research report dated September 8, IDFC Securities' analysts said, "We like management’s clear focus on creating a sustainable business model and focusing on core strength to drive growth. Further, we do not see the entry of new players as a threat to Berger, given the moats that the company has developed over the years in terms of wide portfolio, brand equity, manufacturing & distribution strength. We also like company’s strategy to stick to paint business where it has core understanding and create future avenues for growth by entering in related business (construction chemicals, wood coatings, industrial coatings) where it can leverage its current infrastructure & expertise."
Despite India's gross domestic product slipping to 5 percent in the April-June quarter as consumer demand and private investment slumps, the management of Berger Paints remains optimistic.
Berger Paints India posted 31 percent YoY growth in consolidated net profit at Rs 164 crore in the June quarter. EBITDA margin expanded 170 basis points at 17.8 percent from 16.1 percent in the previous year.
In a recent interview to CNBCTV18, Berger Paints India's managing director and chief executive officer Abhijit Roy said, "We have seen earlier that in 2008-2009 when everything was in topsy-turvy the paint industry had continued to grow even everywhere. Probably, I had mentioned earlier at the results also that those who have money, who want to paint since it is a more of a cash-driven thing, there is no credit taken to paint your house. So typically this cycle continues irrespective of what happens in the financial side. We are affected so much with the banking crisis or any other such issues cropping up. The paint industry continues to do reasonably well. It is linked to GDP and if the GDP slows down it does impact the paint industry, but only to the extent that the slowing is there. I don’t think that it will be a dramatic fall or a dramatic increase happening in the paint industry."
Shares of Berger Paints India settled at Rs 367.95 on Monday, rising almost a percent on NSE at close. So far this year the stock has returned 11.4 percent. The one-year gain on Berger Paints is almost 16.5 percent with the scrip outperforming the benchmark Sensex by 21.5 percent as the BSE frontline index corrected 5 percent during the same period.
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