BERGER PAINT LTD.

COMPANY BACKGROUND.

Berger Paints India Limited is engaged in the manufacture of paints and varnishes, enamels or
lacquers. The Company offers products in categories, including interior wall coatings, exterior
wall coatings, Berger metal and wood paints, protective coating, undercoats and construction
chemicals. Its designer finishes include Silk Illusions Design Metallica, Silk Illusions Non
Metallic, Silk Illusions Metallica and Silk Illusions Marble Finish. Its interior emulsions include
Silk Luxury Emulsion, Easy Clean, Rangoli Total Care and Bison Acrylic Emulsion. Its interior
wall distempers include Bison Distemper. The Company's exterior emulsions include
WeatherCoat All Guard, WeatherCoat Longlife, WeatherCoat Smooth, Walmasta, Weather Coat
Tile Protektor and WeatherCoat Kool & Seal. It also offers Weather Coat Texture, Tartaruga Hi-
Build and Tartaruga. It offers enamels, such as Breathe Easy Enamel, Luxol Lustre, Luxol Satin
Enamel, Luxol High Gloss Enamel and Berger Butterfly GP Enamel.

SWOT ANALYSIS

STRENGTH:

 With nearly one-fifth market share and is ranked one of the top 2 in India.
 Manufactures and markets wide range of decorative and industrial paint products under
various product brands and has a substantial market share
 Green Horizon an initiative taken towards reducing waste and conserving natural
resources; launching eco-friendly and energy efficient products.

WEAKNESS:

 Dependence on decorative segment where competition is intense

 High levels of lead found leading to negative publicity
 Limited liquidity options

OPPURNITIES:

 New Product launches and innovation with changing trends

 Strong growth Potential in India owing to urbanization
 Business diversification
  product diversification
THREATS:

 New entrants in the industry and local companies.

 Fluctuations in raw material prices
 Stiff competition

RATIO ANALYSIS AND INDUSTRY COMPARISON

A) Liquidity Ratio

1. Current Ratio –

Current ratio
Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint ltd. 1.45 1.81 1.73 1.62 1.65
Industry 1.62 1.77 1.74 1.59 1.61

According to graph in the recent years, current ratio of Berger paint ltd. has been decreasing and
it surpassed the industry level in the year also decreasing every year which indicates that the
company is not doing good in maintaining the liability

2. Quick Ratio

Quick Ratio
Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paints Ltd. 0.79 1.02 0.90 0.90 0.82
Industry 0.95 1.14 1.103 0.99 0.93

The quick ratio of Berger paint is less than the industry level in every FY. This implies that the
company has not been getting better at managing liquidity. It shows that company is taking too
much risk by not maintaining an appropriate buffer of liquid resources.
Solvency ratios

1) Debt to Equity Ratio –

Debt to Equity Ratio

Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint Ltd. 0.22 0.04 0.06 0.07 0.09
Industry 0.06 0.03 0.03 0.03 0.03

The debt equity ratio over the last 3 years has been more than the industry average. This means
that company has financed its operations more through way of borrowings than raising funds by
issuing shares. Here we can see that berger paints has brought their DER closer to the industry
average over the period of 3 years which is good for the business.

B) Turnover ratio

1) Inventory Turnover Ratio

Inventory Turnover Ratio

Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint Ltd. 6.52 6.26 5.21 5.15 4.80
Industry 7.03 7.59 6.30 6.34 5.98

Berger paints ITR has been decreasing over the years which are not a good sign.  A low turnover
implies weak sales and possibly excess inventory, also known as overstocking. It may indicate a
problem with the goods being offered for sale or be a result of too little marketing. It shoes that
company is not having good sales.

2) Asset Turnover Ratio

 Total Asset Turnover Ratio
Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint Ltd. 1.82 1.71 1.51 1.38 1.44
Industry 1.70 1.54 1.44 1.26 1.28

The Asset Turnover Ratio of both the company and the industry has been decreasing over the
year which indicates that both are expericing poor sales or its fixed asset has not been utilized to
their full capacity. This might be due to excess production capacity, poor collection methods, or

poor inventory management.

C) Profitability Ratio

1) Gross Margin Ratio

Gross Margin Ratio

Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint Ltd. 54.3 55.2 54.1 48.9 42.8
Industry 53.3 56.0 54.2 50.9 46.2

The gross margin ratio tells gross profit as percentage of sales. The GMR for the Berger paint
and for the industry has been decreasing from last few years. This indicates that the company’s
cost of sales is higher than its rivals. This situation is not good because it shows that its
competitors are earning more. This can lead to decrease in the share price and negative sentiment
of lenders and investors towards the company.

Return on Capital Employed

Return on Capital Employed

 Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint Ltd. 29.7 32.7 33.4 29.9 28.2
Industry 33.2 35.1 34.3 31.4 30.3

The return on capital employed has been less in case of Berger paint in comparison to the
industry average indicating that all the capital whether in the form of debt or in the form of share
capital has not been used more efficiently for generating profits. It shows that less profit is
generated on per capital employed.

E) Valuation Ratio

P/E ratio

P/E Ratio
Year Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Berger paint Ltd. 50.01 40.99 59.54 74.28 114.05
Industry 52.69 49.1 26.01 41.43 53.88

Price earnings ratio of Berger paint is more than the industry average. It is increasing almost
every year.it indicate that a stock price of Berger paints is high relative to earnings and possibly
overvalued.

FORECASTED PERFORMANCE OF BERGER PAINTS LTD.

Forecasted Performance of Berger paint Ltd. for the year 30 sept and march 2021
  2020 2021
Total Operating Revenue 5,691.6 7,114.6
 9 1
Other Revenue 150.82 236.23
5,842.5 7,350.8
Total Revenues 1 5
4,904.4 5,883.0
Cost Of Goods Sold 1 9
1,467.7
Profit Before Intrest and Tax 938.10 6
Exceptional & Extra Ordinary Items 0.00 0.00
Financial Cost 32.68 32.68
1,435.0
Profit Before Tax 905.42 8
%age of tax 0.23 -0.25
Taxes 206.37 -358.77
1,793.8
Net Profit After tax & Intrest 699.05 4

Assumptions:

1. Operating revenues: Operating revenues will decrease in the first two quarters of 2020 due to
Covid 19 impact then it will likely to recover averagely up to March 2021 as explained
above.

2. Other revenues: Other revenues are taken flat since it fluctuates in every year plus most of
the previous earned non-operating revenues are from interest incomes.

3. Cost of goods sold: Cost of goods sold are taken as a percentage of sales, since in the last 5
years berger COGS has increased and it cut offs many of their other expenses in the Covid
period so I am assuming here that they will be able to reduce their COGS.

4. Tax: %age of tax remain same this year and calculated as a percentage of PBT (Profit before
tax)

5. Others: Other items like exceptional and extraordinary items, financial cost are taken flat

Forecasted Balance Sheet Statement for 30th September, 2020 & 31st March, 2021:
PARTICULARS 2020 2021
EQUITY AND LIABILITIES    
EQUITY    
Share Capital 97.11 97.11
2725.6
Other Equity 2 3254.64
2822.7
Total Equity 3 3351.75
     
LIABILITIES    
Non - Current Liabilities    
Financial Liabilities    
Borrowings    
Other Financial Liabilities 11.94 11.94
Provisions 3.16 3.16
Deferred Tax Liabilities 68.17 76.36
Other Non - Current Liabilities 2.45 2.45
Total Non-Current Liabilities 85.72 93.91
     
Current Liabilities    
Financial Liabilities    
Borrowings 219.65 224.04
Trade Payables 973.88 1032.32
Other Financial Liabilities 130.41 130.41
Other Current Liabilities 59.47 64.33
Provisions 20.91 23.42
Current Tax Liabilities 3.54 3.54
1407.8
Total Current Liabilities 6 1478.06
.    
TOTAL EQUITY AND 4316.3
LIABILITIES 1 4923.72
     
ASSETS    
Non - Current Assets    
Property, Plant & Equipment 1072.2 1158
Capital Work-in-Progress 165.46 185.31
Intangible Assets 7.36 7.36
Financial Assets    
Investment 451.25 505.40
Loans 18.39 20.60
Others Financial Assets 4.64 5.19
Other Non-Current Assets 36.78 41.19
Income Tax Assets 21.65 24.25
Total Non-Current Assets 1777.8 1947.3
     
Current Assets    
Inventories 1242.9 1317.43
Financial Assets    
Investment 312.0 589.6
Trade Receivables 645.32 696.94
Cash 30.51 34.17
Bank Balance 117.07 131.12
Loans 8.94 10.01
Others 3.66 4.10
Others Current Assets 178.70 193.00
Total Current Assets 2539.1 2976.37
     
TOTAL ASSETS 4316.8 4923.67

Assumptions:

1. Liabilities: Share capital will remain same as berger already issued the mentioned amount of
shares as per their MOA, like the previous trend and all other items like: long term
borrowings, long term provisions, current liabilities, trade payables, short term provisions are
calculated as a percentage to sales and as per their past trends and plus the impact of corona
during the peak sale session

2. Assets: Tangible assets, inventories, non-current assets, trade receivables are taken as a
percentage to sales and intangible assets will remain flat or same as per the past trends. cash
and cash equivalents is nothing but excess of total capital & liabilities over total assets.

 Forecasted Earning Per Share (EPS) of Berger paint Ltd.

FORECAST Sep-20 Mar-21
EPS 2.72 5.45
For the year 2019-2020 the EPS is likely to fall drastically from previous years because of less
net profit in that period. For the period of 2020-2021 the EPS is likely to more than double
owing to increased profits.

TECHNICAL ANALYSIS

Based on monthly trading:

SHARE PRICE
700

600

500

400

300

200

100

0
16 16 16 16 16 16 17 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20
/20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1/ 3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/

Adj Close

The above chart shows share price data of Berger paint from 2016 to 2020. From the chart we
can see that there have been many spinning top formations which indicates that there was
indecision related to the stock. It seems that the neither the bulls nor the bears have any idea how
the stock will perform.
Moving average is the only indicator that we track on a daily basis. We use 50- day moving
average (DMA) and 200 DMA for our calculation. Whereas, 50 DMA moving above the 200
DMA is a bullish indicator and vice versa.

Moving Average Convergence and Divergence (MACD)

MACD
35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00
9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0
01 01 01 01 01 01 01 01 01 01 02 02 02 02 02 02 02 02
1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2
3/ 4/ 5/ 6/ 7/ 8/ 9/ 10
/
11
/
12
/ 1/ 2/ 3/ 4/ 5/ 6/ 7/ 8/

MACD

MACD is a trend-following momentum indicator that shows the relationship between two
moving averages of a security's price. The MACD is calculated by subtracting the 26-period
Exponential Moving Average (EMA) from the 12- period EMA. It is mostly used by momentum
traders.
Whenever the signal line crosses MACD line and goes below MACD line it shows that one
should start buying as MACD will rise indicating an upward trend is around the corner and when
signal line crosses MACD line and goes above MACD line it tells that it is time to sell as MACD
will decline indicating that there will be a downward trend in future. The signal line of JSW Steel
has been below the MACD line indicating that the stock price has been increasing over the years
proving to be a decent buying opportunity. The signal line crossed MACD line and was above
MACD line providing a good selling opportunity to sell as thereafter MACD declines indicating
presence of a downward trend in near future and has become negative for Q3 and Q4 of FY
2019-2020. The trend also shows that MACD will decline further in future

Relative strength index

RSI
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
7 7 7 7 7 8 8 8 8 8 8 9 9 9 9 9 9 0 0 0 0
01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 02 02 02 02
1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2
3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/ 9/ 11/ 1/ 3/ 5/ 7/

RSI

It is a momentum indicator used in technical analysis that measures the magnitude of recent price
changes to evaluate overbought or oversold conditions in the price of a stock. The value of RSI
range between 0 to 100 and usage of the RSI are that values of 70 or above indicate that a
security is becoming overbought and may be primed for a trend reversal or corrective pullback in
price. An RSI reading of 30 or below indicates an oversold condition.
The RSI of Star Cement over long term has been declining meaning that the stock was
previously overvalued and with time has come closer to becoming an undervalued stock
according to RSI. This downward trend is not good as it tells that the market is becoming of the
view that the company and the stock is not a good performer. Over the years, more and more
selling of the stock has taken place bringing down its price.
Bollinger Bands
Bollinger bands plot the range from mean basis the standard deviation of prices. Since standard
deviation measures volatility, the bands widen when volatility increases and become narrow
when volatility falls. When stock prices move out of the bands, it signal a potential ‘breakout,
from the current levels. In times of very low volatility the bands ‘squeeze’ and become very
close to the mean.

BOLLINGER BAND
700.00

600.00

500.00

400.00

300.00

200.00

100.00

0.00
16 16 17 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 20 20 20 20
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
/1 /1 2/1 4/1 6/1 8/1 0/1 2/1 2/1 4/1 6/1 8/1 0/1 2/1 2/1 4/1 6/1 8/1 0/1 2/1 2/1 4/1 6/1 8/1
10 12 1 1 1 1 1 1

SMA UPPER BAND LOWER BAND

BASED ON DAILY DATA OF SHARE PRICES:

Daily Candle Stick Graphical Representation

STOCK PRICE
700

600

500

400

300

200

100

0
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
1 4 9 2 7 2 5 0 3 8 3 6 1 4 9 3 6 1 4 9 4 7 1
6/ 6/ 6/ 6/1 6/1 6/2 6/2 6/3 7/ 7/ 7/1 7/1 7/2 7/2 7/2 8/ 8/ 8/1 8/1 8/1 8/2 8/2 9/

Adj Close

In the below chart all the green colored candles are bullish candles and red colored candles
are bearish candles. Where top of a candle indicates opening price on the day and bottom
of a candle indicates closing price on the day, shadow above the candle represents the high
price of the day and shadow below the candle represents low price of the day, where
talking about the body of the candle a short bodied candle indicates less trading activities
within a day and a long body of a candle indicates a more trading activities within a day.
 MOVING AVERAGE
580

560

540

520

500

480

460

440
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
1 4 9 2 7 2 5 0 3 8 3 6 1 4 9 3 6 1 4 9 4 7 1
6/ 6/ 6/ 6/1 6/1 6/2 6/2 6/3 7/ 7/ 7/1 7/1 7/2 7/2 7/2 8/ 8/ 8/1 8/1 8/1 8/2 8/2 9/

Adj Close 5 Months 15 Months

MACD
10

-2

-4

-6

As indicated by the below graph when MACD lines try to enter into positive number from a
negative number after 31 JULY 20 then there is a buying opportunity in the market because
 this movement shows the entry of bulls in the market as we can see afterwards, an increase
in the line is there in the graph. This shows the divergence between the two averages.

RSI
90

80

70

60

50

40

30

20

10

RSI

As we discussed earlier this indicator helps us to estimate the strength of a trend and it always
ranged between 0-100. When relative price index is below 30 (indicated by the orange line in
the below graph) then shares is supposed to be oversold means exit of bears and entry of bulls
in the market will be there soon and when strength index is above 70 (indicated by the green
line in the below graph) then security is estimated over bought which means exit of bulls and
entry of bears in the market.
 BOLINGER BAND
700

600

500

400

300
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02
2/2 6/2 8/2 2/2 4/2 6/2 0/2 2/2 6/2 8/2 0/2 4/2 6/2 0/2 2/2 4/2 8/2 0/2 3/2 5/2 7/2 1/2 3/2 7/2 9/2 1/2 5/2 7/2 1/2 2/2
1 1 1 2 2 2 3 / / / 1 1 1 2 2 2 2 3 / / / 1 1 1 1 2 2 2 3 /
6/ 6/ 6/ 6/ 6/ 6/ 6/ 7 7 7 7/ 7/ 7/ 7/ 7/ 7/ 7/ 7/ 8 8 8 8/ 8/ 8/ 8/ 8/ 8/ 8/ 8/ 9

SMA UPPER BAND LOWER BAND

As discussed previously this indicator is used to estimate the oversold and overbought time
in the market by which a trader estimates and sell when the price touches the over band
and buy when the price touches the lower band.

In simple words a trader will look for selling opportunities when price touches the upper
band with an expectation that it will come to its average price in the coming future and vice
versa when price touches the lower band then a trader will look for buying opportunities
because stock is at its cheaper price and it will be expected to gain its average price in the
coming future.