Q4FY21 outcomes: Berger reported consolidated income, Ebitda, PAT development of 49.5%, 61% and 101%, respectively. We think volume development was ~55% YoY. Key causes for powerful overall performance had been (1) continued momentum in customer off-take from Q3FY21, (2) recovery metros and tier-1 cities, (3) recovery in industrial paints and (4) favorable base. Gross margin was steady at 43.7% YoY but Ebitda margin expanded 118bps most likely due to price saving initiatives. Standalone organization reported income and PAT development of 53% and 2.5%, respectively.
Revenue recovery in line with sector: The paint sector (4 industry major firms) reported income and Ebitda development of 6% and 12.4%, respectively in FY21. While Berger’s Q4FY21 are superior to its peers, we note Berger’s FY21 income and Ebitda development of 7.1% and 12%, respectively is largely in-line with the sector development prices.
Higher focus on ancillary merchandise: It has been focusing on ancillary merchandise such as waterproofing and putty. It believes there is immense prospective for these segments to develop taking into consideration low penetration. We model waterproofing to contribute substantially to Berger decorative organization in medium term.
Rising input rates but some margin tailwinds: Input rates are up 10-one hundred% YoY but we model Berger to report just 50bps decrease Ebitda margins due to (1) raise in income share of premium paints with recovery in metros, (2) selective price tag hikes and decrease trade schemes, (3) price saving initiatives, (4) operating leverage and (5) positive contribution from ancillary enterprises.
Rs of 15.9% and 17.5% YoY respectively more than FY21-23. RoE is anticipated to be steady ~24% more than FY21-23. However, we think the stock price tag upside is restricted at existing valuations and therefore retain HOLD rating with a DCF-based target price tag of Rs 800. Key upside threat is greater-than-anticipated industry share gains in paints. Key downside dangers are steep raise in input rates and raise in competitive stress.