Paints stalwart Asian Paints could grow slower than smaller competitors Berger Paints and Indigo Paints in H2FY25, noted domestic brokerage Nuvama Institutional Equities.
As Asian Paints has a higher indexation in larger cities - which have borne the brunt of an urban slowdown due to food inflation, higher housing rentals, low wage growth and high interest payments - it is seeing a larger impact. Further, it has to work off of a higher base compared to last year.
Within the paints space, the brokerage continues to prefer small paint players. Berger Paints and Indigo Paints are Nuvama's preferred picks, with both bagging a buy tag. However, the brokerage prefers Pidilite over paints players.
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Nuvama Institutional Equities also added that being a pan-India player, Asian Paints gets affected the most initially by new competition, as Birla Opus has entered even the metro cities. The paints major dominates metro cities where Berger and Indigo have a low presence.
For example, Berger has 20.9 percent market share pan-India, but in big cities it has only 10 percent market share. Therefore, the entrance of Birla Opus in metro cities has a limited impact on Berger Paints and Indigo Paints.
"Berger Paints has a higher presence in East and Central India. The entry of new players has ushered in a better performance from players with a higher presence in rural regions. Birla Opus also came into the reckoning as it garnered ~2–3 percent market share," added the brokerage.
On the other hand, Indigo Paints has been constantly outpacing the industry for the past six quarters and expects to continue to outstrip the industry growth. Nuvama said, "It has remained a top-tier performer among paints players for the past few quarters, growing at 2–3x the industry growth rate."
In Q3FY25, the brokerage estimated that Asian Paints shall clock volume growth of 1 percent YoY while sales shall decline 3 percent YoY. For Berger Paints, the brokerage forecasts 6 percent volume growth and 5 percent sales growth on-year.
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