BERGER PAINTS NIGERIA PLC
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- Conrad Conley
- 6 years ago
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1 NSE: BERGER; Bloomberg: BERGER NL BERGER PAINTS NIGERIA PLC On The Verge Of Sustainable Growth Amid Stifling Expenses Berger Paints Nigeria Plc recently released its 2013FY score sheet growing its turnover by 8% YoY (vs. 2% 5-year CAGR), which we attribute to the company s repositioning initiatives which included a partnership with KCC corporation of south Korea to distribute marine/protective coatings. Cost of production increased by 6.72% though cost to sales ratio declined by 0.58%, bringing 2013FY cost-tosales to 60.55%. Operating expenses grew 17% even as OPEX margin advanced to 37% in 2013FY fuelled by a 19% increase in administrative expenses. Earnings settled at 31% over 2012FY figures driven by NGN0.038bn gain from the disposal of Robbialac, a prior subsidiary of Berger paints. The company proposed DPS of NGN0.70k implying 7.78% dividend yield at the current price level. We maintain our HOLD recommendation on the counter though we revised our 12-M target price upwards from NGN9.84 to NGN Inconsistent Turnover Growth over the Years Due To Increased Competition: BERGER s current growth in turnover comes after two consecutive years of decline in top line. In 2013 however, the company set in motion strategic initiatives aimed at repositioning BERGER as a major player in the chemical and paints industry. We expect Berger paints to sustain revenue growth in 2014 even as it completes its fully automated factory, establishes its presence in the marine sector on the back of the KCC partnership while also improving its distribution network. As such, we project 2014FY revenue of NGN3.001bn, indicating 11% YoY growth. Disposal of Subsidiary Improves Earnings Profile: The Company s 2013FY PAT came in at NGN0.251bn from NGN0.192bn in 2012FY, despite OPEX of NGN1.005bn, largely due to the NGN0.038bn gain from the sale of Robbialac Paints which had previously contributed negative earnings. Cost of sales advanced 6.72% YoY owing to the industry-wide challenge of raw material importation. We however expect cost-to sales ratio to marginally decline to 60% in 2014 from c.61% in 2013 given expected cost savings from utilising a more efficient production facility. OPEX remained on the rise, growing by 16.42% in 2013FY due to administration expenses. We do not see a moderation in OPEX as growth in administrative expense continues to be a challenge. thus, we forecast OPEX growth of 39% by 2014FY from 37.10% in 2013 which would slightly drag 2014FY earnings to NGN0.250bn from NGN0.251bn as income from sale of subsidiary is a one-off item. Target Price Revised Upwards As Growth Prospects Improve: Payout ratio dropped to 60.5% from 79.2% in 2012 even as Berger Paints proposed DPS of NGN0.70K for the fourth consecutive year implying a dividend yield of 7.7% at current price level. We believe BERGER intends to maintain dividend at NGN0.70k until it achieves sustainable growth. Owing to continued commitment at repositioning the company through strategic initiatives, we think BERGER has the potential of sustaining growth, hence a slight modification of our assumptions. Using a blend of absolute and relative valuation models, our target price was reviewed upward to NGN10.14 from N9.84 indicating a 12.69% upside at the current price. We however maintain our HOLD recommendation. Target Revised as top line growth prospects 2013FY EARNINGS UPDATE TP NGN10.41 Rating: HOLD Key Metrics Current price 9.00 Current TP Actual P/E 10.34x Forward P/E 12.00x Fundamental Key Metrics EPS 0.87 BVPS 8.40 Net Margin 8.30% ROAE 12.05% ROAA 5.01% Asset Turnover 0.77x Leverage 1.53 Mkt. Cap (bn) Key Price Metrics Today s change 0.00% WtD 9.83% MtD 9.83% QtD 9.83% YtD 18.75% 52-Week Return 18.7% 52-Week Hi Week Lo 6.82 Year Hi 9.92 Year Lo 8.0 Beta week share price Trajectory 26 BERGER Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 NSE, Bloomberg, Meristem Research Analyst: Adetutu Adegbayibi adetutuadegbayibi@meristemng.com
2 Trend in turnover and turnover growth vs. forecast Trend in PAT and PAT growth vs. forecast Millions 4,000 3,500 3,000 2,500 2,000 1,500 1, Turnover Turnover Growth 20% 15.8% 15% 11.0% 7.7% 9.0% 10% 9.0% 5% 0% -2.4% -5% -6.6% -10% f 2015f 2016f Millions PAT PAT Growth 20% 15% 15.8% 11.0% 10% 9.0% 9.0% 7.7% 5% 0% -2.4% -5% -6.6% -10% f 2015f 2016f Financial Highlights (NGN billion) BERGER PAINTS Plc FY2013 Profit & Loss Account FY 2013 FY f Turnover Cost of Sales Gross Profit Other Income OPEX PBT PAT Balance Sheet Property, plant and equipment Inventories Debtors/Receivables Cash and bank Other Assets Total Assets Shareholders' fund Total Liabilities Price multiples/ratios Source; NSE, Meristem Research Corporate Actions Shares Outstanding Proposed Dividend 0.70k RoAE 12.05% Dividend Yield 7.77% RoAA 7.87% Payout Ratio 80.70% Cost of Sales Margin 60.55% Gross Profit Margin 39.45% OPEX Margin 37.10% Net margin 9.28%
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4 Movements in Price Target Company Name: BERGER Date Price (N) Previous Target Price(N) New Target Price (N) Previous Recommendation 4/04/ HOLD HOLD New Recommendation Company disclosures Meristem or the analyst(s) responsible for the coverage may have financial or beneficial interest in securities or related investments discussed in this report, which could, unintentionally, affect the objectivity of this report. Material interests, which Meristem or the analyst(s) have with companies or in securities discussed in this report, are disclosed below: Company Berger Paints Plc Disclosure k a. The analyst(s) hold(s) personal positions (directly or indirectly) in a class of the common equity securities of the company. b. The analyst responsible for this report, as indicated on the front page, is a board member, officer or director of the company c. Meristem beneficially owns 1% or more of the equity securities of the company d. Meristem has been the lead manager or co-lead manager of any publicly disclosed offer of securities of the company over the past 12 months. e. Meristem beneficially holds a major interest in the debt of the company f. Meristem has received compensation for investment banking activities from the company within the last 12 months g. Meristem intends to seek, or anticipates receipt of compensation for investment banking services from the company in the next 3 months h. The content of this research report has been communicated with the company, following which this research has been materially amended before its distribution i. The company is a client of the stock broking division of the Meristem group. j. The company is a client of the investment banking division of the Meristem group. k. The company is a client/prospective client of other divisions of the Meristem group. l. The company owns more than 5% of the issued share capital of Meristem m. Meristem has other financial or other material interest in the company. Conflict of Interest It is the policy of Meristem Securities Limited and its subsidiaries and affiliates (Individually and collectively referred to as Meristem ) that research analysts may not be involved in activities that suggest that they are representing the interests of Meristem in a way likely to appear to be inconsistent with providing independent investment research. In addition, research analysts reporting lines are structured so as to avoid any conflict of interests. For example, research analysts are not subject to the supervision or control of anyone in Meristem s Investment Banking or Sales and trading departments. However, such sales and trading departments may trade, as principal, on the basis of the research analysts published research. Therefore, the proprietary interests of those Sales and Trading departments may conflict with your interests.
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Beats its own best; building up for next leg of growth May 08, 2018 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Amit Khimesra amitkhimesra@plindia.com +91 22 66322244 Rating BUY Price Rs239
More informationLarsen & Toubro. Decent performance! Source: Company Data; PL Research
Decent performance! July 30, 2016 Kunal Sheth kunalsheth@plindia.com +91 22 66322257 Samir Bendre samirbendre@plindia.com +91 22 66322256 Rating BUY Price Rs1,558 Target Price Rs1,590 Implied Upside 2.1%
More informationMeristem Wealth Management Limited 22 September, Issue on Offer/Summary. Outlook on Yields /Advised Stop Rates
T-bills Auction Scheduled 23 rd September, 2015 Summary of Previous Auction Issue on Offer/Summary Stop Rate: 91-Day 10.50% 182-Day 13.49% Amount: 91-Day NGN26.30bn 182-Day NGN50.28bn Summary of Current
More informationCoal India. Source: Company Data; PL Research
Lower costs and higher scale off sets weaker realisations February 12, 2016 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Ankit Shah ankitshah@plindia.com +91 22 66322244 Rating BUY Price Rs305
More informationSonata Software. Strong growth, reasonable valuations. Source: Company Data; PL Research
Strong growth, reasonable valuations August 16, 2017 Madhu Babu madhubabu@plindia.com +91 22 66322300 Rating BUY Price Rs160 Target Price Rs200 Implied Upside 25.0% Sensex 31,771 Nifty 9,897 (Prices as
More informationLIC Housing Finance. Stable performance. Source: Company Data; PL Research
Stable performance October 21, 2016 R Sreesankar rsreesankar@plindia.com / +91 22 66322214 Pritesh Bumb priteshbumb@plindia.com / +91 22 66322232 Vidhi Shah vidhishah@plindia.com / +91 22 66322258 Rating
More informationTata Motors. Source: Company Data; PL Research
JLR margin disappoints, Standalone turning around; Accumulate February 06, 2018 Saksham Kaushal sakshamkaushal@plindia.com +91 22 66322235 Poorvi Banka poorvibanka@plindia.com +91 22 66322426 Rating Accumulate
More informationMeristem Wealth Management Limited 3 March, 2015 T-bills Auction Scheduled 4 th March, 2015
Summary of Previous Auction T-bills Auction Scheduled 4 th March, 2015 Issue on Offer/Summary Stop Rate: 91-Day 10.75% 182-Day 13.70% 364-Day 15.25% Amount: 91-Day NGN32.44bn 182-Day NGN30.00bn 364-Day
More informationInvestment Guide for the Week
June 19, 2015 Investment Guide for the Week Naira gains 71bps as losses in equities market persist 1 Naira gains 71bps as losses in equities market persist The bears dominated in four of five trading days,
More informationBharat Petroleum Corporation
Result Update Bharat Petroleum Corporation Accumulate Bharat Petroleum Corporation (BPCL) s results were in-line with our estimates on revenues and below our estimates on profitability front. Revenues
More informationMRF. Result Update. Accumulate
Result Update MRF Accumulate Revenue disappoints MRF posted weak topline growth of 8.1% YoY at ` 38.6 bn for the quarter ended along with gross and EBITDA margins of 39.8% and 15.4% respectively. The gross
More informationHindustan Zinc. Source: Company Data; PL Research
Beat on all counts; tight supplies to keep the Zinc prices firm October 20, 2015 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Ankit Shah ankitshah@plindia.com +91 22 66322244 Rating BUY Price
More informationCapital First. Continuing to grow strong. Source: Company Data; PL Research
Continuing to grow strong May 07, 2018 Pritesh Bumb priteshbumb@plindia.com / +91 22 66322232 R Sreesankar rsreesankar@plindia.com / +91 22 66322214 Shweta Daptardar shwetadaptardar@plindia.com / +91 22
More informationNIIT Technologies. Strong growth in core services. Source: Company Data; PL Research
Strong growth in core services October 19, 2015 Govind Agarwal govindagarwal@plindia.com +91 22 66322300 Hussain Kagzi hussainkagzi@plindia.com +91 22 66322242 Rating BUY Price Rs494 Target Price Rs625
More informationJindal Steel & Power
Good show in tough environment; well placed for long term BUY May 05, 2016 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Ankit Shah ankitshah@plindia.com +91 22 66322244 Rating Accumulate Price
More informationTech Mahindra. Source: Company Data; PL Research
Margin beat driven by Headcount reduction November 01, 2017 Madhu Babu madhubabu@plindia.com +91 22 66322300 Rating BUY Price Rs489 Target Price Rs535 Implied Upside 9.4% Sensex 33,600 Nifty 10,441 (Prices
More informationPunjab National Bank
Slippages remain high despite high recoveries May 22, 2017 R Sreesankar rsreesankar@plindia.com / +91 22 66322214 Pritesh Bumb priteshbumb@plindia.com / +91 22 66322232 Vidhi Shah vidhishah@plindia.com
More informationVa Tech Wabag. On track for a strong H2FY16. Source: Company Data; PL Research
On track for a strong H2FY16 November 09, 2015 Nishna Biyani nishnabiyani@plindia.com +91 22 66322239 Keyur Pandya keyurpandya@plindia.com +91 22 +91 22 66322247 Rating BUY Price Rs668 Target Price Rs1,000
More informationMphasis. Source: Company Data; PL Research
Setting path for growth in Direct Channel, Retain Accumulate June 18, 2015 Shashi Bhusan shashibhusan@plindia.com +91 22 66322300 Hussain Kagzi hussainkagzi@plindia.com +91 22 66322242 Rating Accumulate
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More informationTata Motors. Source: Company Data; PL Research
Good show...but tread carefully ; Accumulate November 09, 2017 Saksham Kaushal sakshamkaushal@plindia.com +91 22 66322235 Poorvi Banka poorvibanka@plindia.com +91 22 66322426 Rating Accumulate Price Rs440
More informationBharat Electronics. Best defence play. Source: Company Data; PL Research
Best defence play October 31, 2017 Kunal Sheth kunalsheth@plindia.com +91 22 66322257 Shreyans Jain shreyansjain@plindia.com +91 22 66322256 Rating BUY Price Rs185 Target Price Rs219 Implied Upside 18.4%
More informationVETIVA RESEARCH SELL. GUINNESS NIGERIA PLC Q3 sales hit 6 year low. Equity Research 25 April 2016
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More informationJK Lakshmi Cement. Source: Company Data; PL Research
Expansions on schedule; lower costs to aid margins June 28, 2016 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Ankit Shah ankitshah@plindia.com +91 22 66322244 Rating BUY Price Rs385 Target
More informationCadila Healthcare. Source: Company Data; PL Research
Q4 broadly in line; US remain cornerstone of growth May 26, 2018 Surajit Pal surajitpal@plindia.com +912266322259 Rating Accumulate Price Rs383 Target Price Rs438 Implied Upside 14.4% Sensex 34,925 Nifty
More informationHDFC.BO HDFC IN. IND-AS transition dampens performance. Q1FY19 Result Update. Rating: BUY CMP: Rs2,029 TP: Rs2,287. July 30, 2018.
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More informationAshok Leyland. Source: Company Data; PL Research
Short term headwinds, structural story intact; Accumulate November 09, 2017 Saksham Kaushal sakshamkaushal@plindia.com +91 22 66322235 Poorvi Banka poorvibanka@plindia.com +91 22 66322426 Rating Accumulate
More informationCummins India. Focusing on growth in core segments. Source: Company Data; PL Research
Focusing on growth in core segments June 07, 2018 Kunal Sheth kunalsheth@plindia.com +91 22 66322257 Shreyans Jain shreyansjain@plindia.com +91 22 66322256 Rating BUY Price Rs681 Target Price Rs857 Implied
More informationHindustan Zinc. Source: Company Data; PL Research
Earnings in line; best placed in the base metal pack July 21, 2016 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Ankit Shah ankitshah@plindia.com +91 22 66322244 Rating Accumulate Price Rs193
More informationKEC International (KECI IN)
(KECI IN) Rating: BUY CMP: Rs370 TP: Rs425 June 15, 2018 Analyst Meet Update Change in Estimates Target Reco Change in Estimates Current Previous FY19E FY20E FY19E FY20E Rating BUY - Target Price 425 -
More informationUltratech Cement. Source: Company Data; PL Research
Higher realisations drove the show; Price led recovery still away April 25, 2018 Kamlesh Bagmar kamleshbagmar@plindia.com +91 22 66322237 Amit Khimesra amitkhimesra@plindia.com +91 22 66322244 Rating Accumulate
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More informationCrompton Greaves Consumer Electricals
Enough headroom for growth in core categories February 20, 2018 Kunal Sheth kunalsheth@plindia.com +91 22 66322257 Shreyans Jain shreyansjain@plindia.com +91 22 66322256 Rating BUY Price Rs232 Target Price
More informationDangote Cement Plc. Improved Product Pricing Boosts Earnings. Nigeria Equities Industrial Goods April 3, 2018
Dangote Cement Plc Nigeria Equities Industrial Goods April 3, 2018 Improved Product Pricing Boosts Earnings INVESTMENT SUMMARY Dangote Cement Plc reported a stellar performance in its FY 17 audited account.
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May-14 Jul-14 Aug-14 Sep-14 Oct-14 Dec-14 Jan-15 Feb-15 Apr-15 May-15 India Research Infrastructure May 22, 215 QUARTERLY REVIEW Bloomberg: AHLU IN Reuters: AHLU.BO BUY Better performance ahead ACIL posted
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More informationBHEL.BO BHEL IN. Structural story remains weak. Q1FY19 Result Update. Rating: REDUCE CMP: Rs72 TP: Rs73. July 25, 2018
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