Reduce Berger Paints; target of Rs 470: ICICI Securities

ICICI Securities recommended reduce rating on Berger Paints with a target price of Rs 470 in its research report dated November 06, 2024.

Broker Research

November 06, 2024 / 13:51 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Securities research report on Berger Paints

Paint industry has likely declined by ~2% in Q2FY25. Considering industry slowdown and steep increase in competitive pressures, we believe Berger reported moderate results with volume growth of 3.6% YoY. While EBITDA margin contracted 147bps YoY to 15.6% in Q2FY25, it was within the guided band of 15%-17%. Berger has also intensified the investments in urban markets with additional investments in distribution and GTM. Its market share in key metros is ~10% compared to pan-India (likely M&A opportunity) market share of ~20%. It plans to steadily improve market shares to ~15%. It also added 2,200+ retail touchpoints and 2,000+ colorbank machines in Q2FY25. Berger also indicated that there is healthy improvement in off-take of premium products which are margin accretive. The demand has also improved towards the end of Sept’24 indicating likely recovery in off-take in H2FY25. We reckon [comfortable] competitive equilibrium in paints is likely broken. Retain underweight on large cap paints. Maintain REDUCE.

Outlook

We model Berger to report revenue and PAT CAGRs of 6.9% and 3.2%, respectively, over FY24-26E. We believe increase in competitive pressures post Grasim’s entry is likely to impact industry profit pool and thus valuation multiples. Maintain REDUCE with DCF-based revised TP of INR 470 (implied P/E of 44x on FY26E EPS).

For all recommendations report, click here