Hold Berger Paints India: target of Rs 810: ICICI Direct

ICICI Direct's research report on Berger Paints India

Berger’s Q3FY21 performance was much ahead of our expectations on all fronts. Overall volume growth at ~28% was largely led by decorative segment wherein rural and semi urban regions have witnessed a continuous trend of strong demand supported by the festive season. On the other hand, a strong recovery in automotive sales helped in a robust revival in the performance of industrial paints (~15% of topline). The management has reiterated strong growth momentum will continue in Q4 led by uptick in urban demand and a favourable base. We believe volume growth for Berger would be in line with market leader Asian Paints at 13% in FY20-23E supported by market share gains and reduction in repainting cycles. On the margin front, we believe EBITDA margin will normalise, going forward, with a recovery in input prices and restoration of overheads.

Outlook

We maintain our HOLD rating on the stock with a revised target price of Rs 810/share (earlier TP Rs 675).