After a brief consolidation phase, what most traders wait for is the perfect breakout point. According to ICICI Direct, Berger Paints is sitting on one right now, above the falling supply line after 15 weeks of consolidation range signaling a primary uptrend.
"The share price in the last 15 weeks has been consolidating in the broad range of Rs 552-432. In the current week trade it has resolved above the same highlighting strength and continuation of the up move," said the brokerage report.
Source: ICICI Direct Research ReportInterestingly, this has been a pattern for the stock in the last 4 years. In multiple occasions, the stock's buying demand emerged in the vicinity of 52 weeks EMA (exponential moving average) coincided with demand line joining lows since July 2019 (Rs 302). Currently, both of these are placed around Rs 500-490 levels which are expected to act as a major value area for the stock in case of any corrective decline, explained the report.
With all the aforementioned evidence, the brokerage believes the stock to accelerate towards Rs 635 in the medium trend.
Fundamentally, ICICI Direct noted that the long-term growth story of decorative paint with shortening repainting cycle, rising aspirations, and urbanisation level in India remains intact.
"Berger Paint is likely to report strong earnings CAGR of 22 percent FY20-22E supported by a recovery in demand and elevated margins (backed by benign raw material prices). With minute Debt/Equity (of 0.2x), strict working capital management led to strong cash flow from operation (up ~60% YoY) in FY20. We maintain our positive stance on the stock given its strong balance sheet position," added the report.
First Published: Aug 13, 2020 2:46 PM IST
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