Berger Paints: Hold/Buy on declines

Recommendation: Hold/Buy on declines

Anup Menon

The Berger Paints stock trades at Rs 91 and at a price earnings multiple of around eight times its latest annualised earnings per share.

The company's growth prospects in the near future looks stable. However, there has not been much market interest in the stock, which could mean a limited upside for the stock.

Business: Berger Paints has a 13 per cent share in the market and could turn out to be a close competitor with Goodlass for the second place in the industry. Its product profile includes some high-end paints such as Luxol Hi-Gloss Synthetic Enamel and Viton Auto-Refinish.

Prospects: The prospects for the company in the near term is stable. It has presence in both industrial and decorative paints segment and has been on an acquisitions spree to enhance its presence. Its acquisition of Rajdoot Paints gives the company greater geographical reach.

Post-acquisition, its presence would be felt in all four regions. Since profitability in the decoratives segment would largely depend on the company's ability to generate volumes, the increasing market presence is a positive factor. It has also been exploring target companies in other countries such as Sri Lanka.

Berger Paints has been steadily making its presence felt in the industrial paints segment. Access to technology is an important factor for success in this segment. Berger Paints has alliances with Herberts, Germany, and Nippon Paints, Japan, for industrial paints and Teodur NV, Holland, for powder coatings.

Overall, the company's performance has been good in recent times. Its judicious mix of the industrial and decorative paints business should help the company in the near term. Fresh investments can be considered from the short-term perspective.