Berger Paints
Berger Paints
Berger Paints
15 OCT 2013
Berger Paints
NEUTRAL
INDUSTRY
FMCG
Rs 220
Target Price
Rs 240
Nifty
6,089
Sensex
20,548
BRGR IN/BRGR.BO
346
76/1,234
58
Rs 256/136
3M
6M
12M
Absolute (%)
(8.7)
16.3
53.8
Relative (%)
(11.3)
4.3
44.0
74.96
3.00
FIIs
11.35
10.69
Source : BSE
Harsh Mehta
harsh.mehta@hdfcsec.com
+91-22-6171-7329
FINANCIAL SUMMARY
Particulars (Rs mn)
Net Sales
FY11
FY12
FY13
FY14E
FY15E
EBIDTA
2,503
3,034
3,712
4,218
5,086
Net profit
1,501
1,800
2,184
2,491
3,060
EPS (Rs)
4.3
5.2
6.3
7.2
8.8
P/E (x)
50.8
42.4
35.0
30.6
24.9
EV/EBITDA
31.0
25.6
21.4
18.5
15.0
25.2
Bergers market share in domestic decorative paint
Source: Company, HDFC sec Inst Research
business has surged from 15% to 19% in the past five
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
RoE (%)
23.3
24.3
25.1
24.1
25.0
20.0
15.0
100%
23.8
19.5
19.3
13.9
14.5
17.2
16.2 16.5
15-60 years
<15 years
25.9
20.6
13.5
13.0
10
57
57
58
60
62
63
37
36
34
32
30
28
CY90
CY95
CY00
CY05
CY10
CY15E
80%
60%
10.0
>60 years
40%
5.0
20%
FY15E
FY14E
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
0.0
0%
56.0
42.0
28.0
14.0
0.0
Japan
provides
70.0
Age 60 +
USA
consumption
China
Europe
Indonesia
India
Page | 2
Brazil
71.0
China
India
Russia
% of total population
68.0
200
65.0
150
62.0
Urban
50
CY40E
CY35E
CY30E
CY25E
CY20E
CY15E
CY10
CY05
CY00
56.0
All India
INR '000
100
59.0
Rural
250
13mn (6%)
CY90
CY10
CY20E
CY30E
Affluent >$18.5k
CY00
Rs
Rural
Urban
2,500
34mn(14%)
Aspires $7.4k-18.5k
2,000
1,500
72mn(30%)
1,000
500
121mn(50%)
Strugglers<$3.3k
0
July 2004June 2005
July 2009-June
2010
July 2011-June
2012
Page | 3
100
Mn
87
80
60
47
40
20
7
CY05
CY15E
CY25E
% of disposable income
32.0
24.0
16.0
Indonesia
Malaysia
South Korea
Thailand
0.0
India
8.0
China
USA
NZ
Aus
UK
Malayasia
Taiwan
Sing
Korea
Japan
Thailand
China
India
Indonesia
23
19
17
10
8
0
39
55
49
63
78
71
97
96
Consumer credit/GDP(%)
50
100
150
Page | 4
Rapid urbanisation
700
Mn
Tamil Nadu
Gujarat
Maharashtra
Karnataka
Punjab
Haryana
West Bengal
Kerala
Andhra Pradesh
Madhya Pradesh
Jharkhand
Rajasthan
Chhattisgarh
Uttar Pradesh
Orissa
Himachal Pradesh
Bihar
600
500
400
300
200
100
0
CY91
CY01
CY08
CY30E
Rural
46
Urban
54
58
69
40
54
CY90
67
53
44
58
44
37
36
31
29
28
28
32
25
31
25
33
24
12
9
24
26
21
24
18
20
17
66
57
52
45
40
41
46
40
% of total population
60
20
CY08
46
42
CY01
CY08
31
CY30E
Page | 5
% YoY
50
40
30
20
Cotton
10
5
0
Source: Shalimaar Paints, Akzo Nobel Paints, HDFC sec Inst Research
Kg
14
350
300
250
200
North
America
Japan
400
Australia
450
East
Europe
Middle
East
Central
Europe
10
China
500
SE Asia
12
India
GDP growth
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
Urad
Ragi
Maize
Bajra
Soyabean
Sunflower
Seeds
Jowar
Paddy
10
Rs bn
CAGR 15%
150
100
50
0
2010
2011
2012
2013
2015
2020
Page | 6
increase
6.0
5.0
4.0
4.0
4.2
4.6
4.9
5.1
5.6
6.1
6.0
3.0
2.0
Others
2%
1.0
0.0
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
Kansai
Paints
15%
Berger
Paints
19%
Page | 8
11.2
11.1
10.3
10.7
10.5
8.0
6.0
4.0
2.0
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
FY15E
FY14E
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
8.2
10.0
10.5
9.8
10.0
9.8
12.0
10.0
14.0
9.4
Page | 9
7,500
INR/barrel
6,000
4,500
3,000
1,500
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
39.4
38.5
38.0
36.0
34.0
36.9
34.5
39.1
37.3
36.4
33.9
Asian Paints
Berger Paints
40.0
30.0
32.0
20.0
30.0
FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
10.0
0.0
FY11
FY12
FY13
FY14E
FY15E
Page | 10
Asian Paints
1.0
0.8
0.6
0.4
0.2
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
KEY RISKS
Apr-08
Apr-09
0.0
Berger
1.2
Oct-08
Apr-08
Oct-07
VALUATION
Oct-07
Page | 11
COMPANY DESCRIPTION
Buisness mix
Overseas
7%
JV with intl
majors
3%
Domestic
industrial
15%
Poland
Nepal
Page | 13
ANNEXURE
Industry overview
GDP growth
20
15
Rs bn
450
400
CAGR 15%
350
10
300
250
200
150
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
100
50
0
Source: Shalimaar Paints, Akzo Nobel Paints, HDFC sec Inst Research
2010
2011
2012
2013
2015
2020
KEY ASSUMPTIONS
Company
Assumptions
Consol. Revenue
growth
Domestic volume
growth
Domestic pricing
change
COGS as % of sales
Ad spends as % of
sales
EBITDA Margin
FY11
FY12
FY13
FY14E
FY15E
24
26
14
13
17
19.5
12.3
7.8
8.4
11.3
5.1
11.3
6.6
5.0
6.0
62.7
63.6
61.5
60.6
60.9
4.8
5.1
5.5
5.9
5.8
10.7
10.3
11.1
11.2
11.5
Page | 15
INCOME STATEMENT
(Rs mn)
Net Sales
Growth (%)
FY11
FY12
FY13
FY14E
FY15E
23,407
29,477
33,464
37,823
44,330
(Rs mn)
FY11
FY12
FY13
FY14E
FY15E
692
692
693
693
693
SOURCES OF FUNDS
23.8
25.9
13.5
13.0
17.2
Material Expenses
14,687
18,754
20,586
22,938
26,992
Reserves
6,203
7,223
8,839
10,456
12,442
Employee Expenses
1,432
1,640
1,871
2,184
2,555
6,895
7,915
9,532
11,148
13,135
A&P Expenses
1,130
1,496
1,833
2,246
2,577
Minority Interest
3,655
4,552
5,461
6,237
7,119
1,834
1,444
2,152
1,799
1,399
EBIDTA
Share Capital
2,503
3,034
3,712
4,218
5,086
1,339
1,966
3,344
2,698
2,098
EBIDTA (%)
10.7
10.3
11.1
11.2
11.5
Total Debt
3,173
3,410
5,497
4,497
3,497
25.7
21.2
22.3
13.6
20.6
Deferred Taxes
263
312
408
408
408
Other Income
302
305
314
334
355
Depreciation
401
472
567
639
723
2,404
2,868
3,459
3,913
4,719
243
324
377
401
376
PBT
2,161
2,544
3,082
3,511
4,343
CWIP
Tax
660
744
898
1,020
1,283
Investments
EBIT
Interest
Minority Interest
Core PAT
30
30
30
10,340
11,647
15,465
16,082
17,068
4,341
5,089
5,989
8,350
8,327
818
729
1,725
113
63
526
40
108
108
108
133
447
545
545
545
Inventories
4,438
5,552
6,364
6,527
7,407
Trade Receivables
2,728
3,586
4,114
4,300
4,979
1,253
1,824
2,270
2,621
3,334
APPLICATION OF FUNDS
Net Block
1,501
1,800
2,184
2,491
3,060
24.7
19.9
21.3
14.1
22.8
1,501
1,800
2,184
2,491
3,060
420
542
649
649
649
24.7
19.9
21.3
14.1
22.8
44
61
103
103
103
RPAT
RPAT Growth (%)
EPS
EPS Growth (%)
4.3
5.2
6.3
7.2
8.8
Current Assets
8,883
11,566
13,500
14,199
16,471
18.5
19.9
21.2
14.1
22.8
Trade Payables
3,879
5,531
5,514
6,345
7,558
482
704
893
893
893
4,361
6,235
6,407
7,238
8,451
4,522
5,331
7,093
6,961
8,020
10
4.5
10,340
11,647
15,465
16,082
17,068
Misc Expenses
TOTAL APPLICATION OF FUNDS
Source : Company, HDFC sec Inst Research
Page | 16
KEY RATIOS
(Rs mn)
FY11
FY12
FY13
FY14E
FY15E
Reported PAT
1,501
1,800
2,184
2,491
3,060
210
216
223
237
250
1,291
1,584
1,961
2,254
FY11
FY12
FY13
FY14E
FY15E
GPM
37.3
36.4
38.5
39.4
39.1
2,810
EBITDA Margin
10.7
10.3
11.1
11.2
11.5
PROFITABILITY (%)
462
315
606
1,040
1,099
EBIT Margin
9.0
8.7
9.4
9.5
9.8
(702)
(355)
(1,584)
483
(346)
APAT Margin
6.4
6.1
6.5
6.6
6.9
1,051
1,545
983
3,777
3,563
RoE
23.3
24.3
25.1
24.1
25.2
(1,025)
(1,336)
(2,149)
(1,388)
(650)
Core RoCE
16.7
16.9
16.5
16.2
18.7
26
208
(1,166)
2,390
2,913
RoCE
17.4
18.5
18.1
17.6
20.1
Non-operating income
210
216
223
237
250
913
631
108
31
29
29
29
30
2.4
2.7
2.5
2.4
2.7
Inventory (days)
60
62
65
63
61
Debtors (days)
40
39
42
41
41
Capex
Free Cash Flow
98
(489)
(1,818)
(1,151)
(400)
349
196
2,092
(1,000)
(1,000)
(237)
(274)
(327)
(401)
(376)
Debt Issuance
Interest
EFFICIENCY
Dividend
(421)
(406)
(484)
(874)
(1,074)
Payables (days)
54
58
60
61
62
(309)
(484)
1,281
(2,276)
(2,450)
47
43
47
43
40
840
571
445.8
351
713
Debt/EBITDA (x)
1.3
1.1
1.5
1.1
0.7
1,253
1,824
2,270
2,621
3,334
Net D/E
0.2
0.2
0.3
0.2
0.0
Interest Coverage
8.7
7.9
8.4
8.9
11.6
4.3
5.2
6.3
7.2
8.8
5.5
6.6
7.9
9.0
10.9
BV (Rs/sh)
19.9
22.9
27.5
32.2
37.9
DPS (Rs/sh)
1.3
1.4
1.8
2.2
2.7
P/E
50.8
42.4
35.0
30.6
24.9
P/BV
11.1
9.6
8.0
6.8
5.8
EV/EBITDA
31.0
25.6
21.4
18.5
15.0
OCF/EV (%)
1.4
2.0
1.2
4.8
4.7
FCF/EV (%)
0.0
0.3
(1.5)
3.1
3.8
0.0
0.3
(1.5)
3.1
3.8
0.6
0.6
0.8
1.0
1.2
VALUATION
Page | 17
Rating Definitions
BUY
Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL
Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
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Page | 18