Anand Rathi
Berger Paints is the second largest player in the Indian paint industry after Asian paints, currently they are enjoying 18-20 percent market share out of total market size of ~Rs 50,000 crore.
The company has posted a top line CAGR of ~10 percent in last 20 years led by urbanization & demand from re-painting. As per the management, 80 percent demand is coming from repaint and rest is coming from the new paint.
In its latest financial results, the company has reported a growth of 13.4 percent in revenues at Rs 14,721 million in Q4-FY19 as against Rs 12,983 million in Q4-FY18. The growth was mainly on back of growth in decorative business led by double digit volume growth.
In terms of growth, we continue to expect Indian paints industry to grow at around 1.4-1.6 (x) of Indian GDP in the coming.
We believe Berger Paints is better placed to capture incremental growth in the industry on back of its strong distribution network, cost efficient operations, and strong brand positioning.
The company has lower penetration compared to the leader which provides higher scope for further growth. We initiate our coverage on Berger Paints with a BUY rating and a target price of Rs 365.
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