Berger Paints Q2 Results Review - Could Have Been Better; Maintain 'Reduce': ICICI Securities

ICICI Securities Report

Paint industry has likely declined by ~2% in Q2 FY25. Considering industry slowdown and steep increase in competitive pressures, we believe Berger Paints India Ltd. reported moderate results with volume growth of 3.6% YoY. While Ebitda margin contracted 147 bps YoY to 15.6% in Q2 FY25, it was within the guided band of 15%-17%.

Berger has also intensified the investments in urban markets with additional investments in distribution and go-to-market. Its market share in key metros is ~10% compared to pan-India (likely merger and acquisition 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 Q2 FY25. 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 September 2024 indicating likely recovery in off-take in H2 FY25.

We reckon [comfortable] competitive equilibrium in paints is likely broken. Retain underweight on large cap paints. Maintain Reduce.

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