Berger Paints India Ltd.: Risk Reward Update

研报英文原文证据摘录

Berger Paints India Ltd.: Risk Reward Update

UpdateM

RiskRisk RewardReward– Berger- PaintsBergerIndia Ltd.Paints(BRGR.NS)India Ltd. (BRGR.NS)

Risks to multiples amid high competitive intensity

PRICE TARGET Rs429.00 UNDERWEIGHT THESIS

Probability-weighted residual income model, weighted 30% bull, 50% base, 20% bear. We ▪Berger is the second-largest player in the

assign a higher weight to the bull case given potential to gain market share, while the bear domestic decorative paint market by market

case weight reflects risks to margins from rising competitive intensity. Key assumptions: share. It ranks high on key aspects of

Cost of equity 12.52% across scenarios (risk-free rate of 7%, risk premium of 6%, beta of decorative demand.

0.92) ▪Given rising competitive intensity, we

Terminal growth 6.0% base, 6.3% bull, 5.8% bear. expect it to compete aggressively to retain

market share. We expect growth to be lower Rs520.09

vs the past and margins to come at the cost

Consensus Price Target Distribution Rs385.00 Rs625.00 of growth or vice versa. MS PT

category dynamics due toSource: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates ▪Changing

intensifying competition, which leads to

lower growth and medium-term risks to

margins, will likely result in a continued

RISK REWARD CHART discount for paint companies in comparison

to discretionary stocks.

the market leader is INR Rs689.00Rs689.00(+41.16%)Rs689.00(+41.16%)(+41.16%) ▪Near-term,

attempting to gain back lost share, which

will make the upcoming quarters challenging

600 for Berger.

Rs488.10Rs488.10Rs488.10 Consensus Rating Distribution

Rs429.00Rs429.00(-12.11%)Rs429.00(-12.11%)(-12.11%)

41% Overweight

27% Equal-weight

32% Underweight

Rs280.00Rs280.00(-42.63%)Rs280.00(-42.63%)(-42.63%) MS Rating