Update on the Indian Equity Market:
On Monday Nifty closed 1.6% higher at 12,461. Among the sectoral indices, Bank (+2.7%), Pvt Bank (+3.3%), and Fin services (+1.9%) closed higher. Media (-0.01%) closed lower. Cipla (-2.9%), Adani ports (-1.1%), and Maruti (-0.6%), closed on a negative note. Divis labs (+5.4%), Bharti Airtel (+5.1%), and IndusInd Bank (+4.9%) were among the top gainers.
Excerpts from an interview of Mr. Abhijit Roy MD & CEO, Berger paints with CNBC-TV18 dated 6th November 2020:
● The months of August and September saw a good pickup in demand.
● On volume growth, Mr. Roy said there was a 17% growth in the decorative business and overall all volume growth was around 16%.
● Speaking about growth sustainability, he said October was better and November 20 to date is good. On the back of this, the company expects 3QFY21 to be better than 2QFY21.
● In Q2FY21, the performance of Berger was better than the industry.
● On the Expense front, he said there are savings in fixed expenses and some of these expenses like traveling and rent will be lower than normal in the near term. There is also some amount of savings on the raw material front.
● On the demand trend, he said most of the demand is coming from Tier 2, 3, and 4 towns. The demand is also picking up in urban centers.
● On products, he said earlier the lower and economic products were seeing a higher demand but since October month there is a revival in premium and luxury category as well.
● The company plans to expand its capacity. The current capacity utilization was around 93%.
● The new plant is expected to be operational by December 21.
Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Berger Paints was ₹ 650 as of 09-November-2020. It traded at 104x/ 74x/ 62x the consensus Earnings per share estimate of ₹ 6.27/8.78/10.5 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Berger Paints is ₹ 489/- which implies a PE multiple of 47x on FY23E EPS of ₹10.5/-.
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