BERGEPAINT - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.7
| Stock Code | BERGEPAINT | Market Cap | 55,972 Cr. | Current Price | 480 ₹ | High / Low | 605 ₹ |
| Stock P/E | 53.8 | Book Value | 49.0 ₹ | Dividend Yield | 0.79 % | ROCE | 24.9 % |
| ROE | 20.0 % | Face Value | 1.00 ₹ | DMA 50 | 517 ₹ | DMA 200 | 535 ₹ |
| Chg in FII Hold | -0.10 % | Chg in DII Hold | 0.37 % | PAT Qtr | 176 Cr. | PAT Prev Qtr | 321 Cr. |
| RSI | 35.4 | MACD | -16.8 | Volume | 1,94,283 | Avg Vol 1Wk | 2,76,769 |
| Low price | 453 ₹ | High price | 605 ₹ | PEG Ratio | 4.16 | Debt to equity | 0.08 |
| 52w Index | 17.9 % | Qtr Profit Var | -23.0 % | EPS | 8.69 ₹ | Industry PE | 34.2 |
📊 Analysis: Berger Paints (BERGEPAINT) demonstrates strong fundamentals with ROE at 20% and ROCE at 24.9%, supported by a very low debt-to-equity ratio (0.08). These metrics highlight efficient capital usage and financial stability. However, the stock trades at a steep premium with a P/E of 53.8 versus the industry average of 34.2, and a PEG ratio of 4.16 suggests overvaluation relative to earnings growth. Recent quarterly profit decline (-23%) and weak technical indicators (RSI 35.4, MACD negative) indicate near-term weakness.
💰 Ideal Entry Zone: 450 ₹ – 470 ₹, closer to the 52-week low, offering a safer valuation entry point below DMA levels.
📈 Exit / Holding Strategy: For existing holders, maintain a long-term horizon (3–5 years) given strong brand positioning and consistent dividend payouts. Consider partial profit booking near 600 ₹ resistance if valuations remain stretched. Long-term investors can continue holding for compounding returns, supported by strong ROE/ROCE and low leverage.
✅ Positive
- High ROE (20%) and ROCE (24.9%) reflect strong operational efficiency.
- Low debt-to-equity (0.08) ensures financial resilience.
- Dividend yield (0.79%) provides steady shareholder returns.
- Strong brand presence in decorative paints market.
⚠️ Limitation
- Valuations are expensive with P/E at 53.8 vs industry 34.2.
- PEG ratio of 4.16 indicates poor valuation-to-growth balance.
- Quarterly profit decline (-23%) raises short-term concerns.
- Weak technicals (RSI 35.4, MACD negative) suggest bearish momentum.
📉 Company Negative News
- PAT dropped from 321 Cr. to 176 Cr. in the latest quarter.
- FII holding decreased (-0.10%), showing reduced foreign investor confidence.
📈 Company Positive News
- DII holdings increased (+0.37%), reflecting domestic institutional support.
- Strong long-term fundamentals with consistent dividend payouts.
🏭 Industry
- Paints industry PE at 34.2, indicating sector growth potential.
- Decorative paints demand expected to rise with housing and infrastructure expansion.
🔎 Conclusion
Berger Paints is a fundamentally strong company with excellent capital efficiency and low debt. However, current valuations are stretched, and near-term earnings pressure suggests caution. Ideal entry lies between 450–470 ₹ for new investors. Long-term holders can continue for 3–5 years, but should consider partial exits near 600 ₹ resistance if valuations remain elevated.