Reviews
In this edition, we have reviewed Berger Paints India Ltd. and West Coast Paper Mills Ltd. We suggest our reader-investors to HOLD in Berger Paints India Ltd. and West Coast Paper Mills Ltd
We had recommended Berger Paints India Ltd. in Volume 36, Issue No. 8, dated March 2, 2021 to March 15, 2021, under the ‘Choice Scrip’ segment.The recommend-ed price for the stock was Rs729.6. We had recommended the stock on the basis of the positive growth outlook for the company. Berger Paints is an Indian multinational paint company, based in Kolkata. It has 16 manufacturing units in India, two in Nepal, and one each in Poland and Russia. The consolidated quarterly financial performance of the company states that net sales and other operating income was recorded at Rs1,619.21 crore in Q1FY22 as compared to Rs826.14 crore in Q1FY21, giving a rise of 96 per cent.
The operating profited ascended attractively by 96.42 per cent from Rs120.56 crore in Q1FY21 to Rs236.80 crore in Q1FY22. The net profit for the quarter registered at Rs135.09 crore in Q1FY22 as compared to net profit of Rs49.8 crore in Q1FY21, posting a robust rise. On the annual front, net sales and operating income zoomed by 7.1 per cent from Rs6,365.82 crore in FY20 to Rs6,817.59 crore in FY21. The operating profit of Rs1,129.51 crore of FY20 gained 9.74 per cent to reach operating profit of Rs1,239.47 crore in FY21. FY21 reported net profit of Rs725.33 crore in comparison to net profit of Rs664.40 crore reported in FY20, with gains of 9.17 per cent on a YoY basis.
The company’s decorative paint business showed strong growth over the corre-sponding quarter last year aided by a low base, even though impacted by the second wave of the pandemic in May 2021. The company’s general industrial and automotive business also maintained its growth trend supported by a low base. Protective and infrastructure coatings business also posted healthy growth even under a restrictive business environment over the corresponding period last year. On an overall basis, the company is well-poised for growth in the coming quarters.
We had recommended West Coast Paper Mills Ltd. in Volume 36, Issue No. 8, dated March 2, 2021 to March 15, 2021, under the ‘Analysis’ segment. The recommended price for the stock was Rs251. We had recommended the stock based on the company’s ability to profit from upgraded operations and expansion plans that include a shift towards products of the future. West Coast Paper Mills Limited (WCPM) is one of the oldest and the largest producers of paper for printing, writing and packaging in India.
The financial performance of the company reveals that on a consolidated quarterly basis the net sales and other operating income was recorded at Rs537.61 crore in Q1FY22 as compared to Rs301.99 crore in Q1FY21, giving a rise of 78.02 per cent. The operating profited ascended massively from Rs16.5 crore in Q1FY21 to Rs114.15 crore in Q1FY22. The net profit for the quarter registered at Rs39.21 crore in Q1FY22 as against net loss of Rs46.94 crore in Q1FY21. On the annual front, net sales and operating income squeezed by 9.96 per cent from Rs2,492.86 crore in FY20 to Rs2,244.53 crore in FY21. The operating profit of Rs669.83 crore of FY20 dipped 58.6 per cent to reach operating profit of Rs277.30 crore in FY21.
FY21 reported net loss of Rs4.38 crore in comparison to net profit of Rs406.49 crore reported in FY20. WCPM has been investing heavily into modernising its equipment, improving quality, and developing personnel to maintain its position as a leader. To manage costs effectively, the company has a fully integrated paper and pulp facility right from processing pulp from the woods to using captive power source. The size and scale of the operations gives the company leverage in sourcing raw materials as well as in transporting finished goods at the best possible rates. Hence, owing to the improved profitability of WCPM in the last few years due to improved productivity and efficiency, we recommend HOLD
(Closing price as of Oct 04, 2021)