Berger Paints: Weaker Q1 show indicates premium valuation unjustifiable

46% fall in top line and muted profit margin led to 88% dip in pre-tax profit in June quarter

Berger Paints’ (Berger’s) June 2020 quarter (Q1) profit performance, announced last Friday, was not only weaker than the Street’s expectation, but also worse than the numbers of market leader Asian Paints.

This hurt sentiment towards Berger’s stock, which, at 60 times its FY22 estimated earnings, is currently trading around 16 per cent premium to Asian Paints, which is also three times in size. The stock fell over 4 per cent in intra-day trade on Monday before ending the day at Rs 541.6, a decline of 1.6 per cent. The Sensex was up 0.5 per cent on Monday; Asian Paints rose 1.9