Expanding Premium Offerings Will Increase Market Share In India's Urban Areas

Key Takeaways

• Expanding product mix with premium offerings could drive higher margins and market share improvements in urban areas.
  
• Strategic focus on diverse business segments is likely to support future revenue growth and profitability.
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Catalysts

Manufactures and sells paints for home, professional, and industrial users in India and internationally.

• The implementation of an urban initiative program to increase market presence in metro areas suggests potential future revenue growth, as urban markets have a sizable potential that is currently underdeveloped by the company.
  
• The company is expanding its product mix with differentiated and premium products, which is expected to drive higher gross margins due to their higher price points and market share gains.
  
• Strategic focus on growing the Protective & Infrastructure business is projected to deliver continued volume and value growth, potentially increasing overall revenue.
  
• Investments in construction chemical and waterproofing segments, with a broadened product portfolio, are likely to support future revenue and margin expansion, given the robust performance seen in the sector.
  
• The recovery from one-off costs taken by international subsidiaries (such as BJN Nepal and others) is expected to enhance profitability in forthcoming quarters, offering a catalyst for improved earnings.

Berger Paints India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Berger Paints India's revenue will grow by 10.2% annually over the next 3 years.
• Analysts are assuming Berger Paints India's profit margins will remain the same at 10.2% over the next 3 years.
• Analysts expect earnings to reach ₹15.3 billion (and earnings per share of ₹13.45) by about December 2027, up from ₹11.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹13.3 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 56.3x on those 2027 earnings, up from 48.5x today. This future PE is greater than the current PE for the IN Chemicals industry at 22.3x.
• Analysts expect the number of shares outstanding to decline by 0.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.09%, as per the Simply Wall St company report.

Berger Paints India Future Earnings Per Share Growth

Risks

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Valuation

• The analysts have a consensus price target of ₹523.52 for Berger Paints India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹650.0, and the most bearish reporting a price target of just ₹420.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be ₹150.9 billion, earnings will come to ₹15.3 billion, and it would be trading on a PE ratio of 56.3x, assuming you use a discount rate of 13.1%.
• Given the current share price of ₹476.3, the analyst's price target of ₹523.52 is 9.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.