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Dolat Capital Report
Berger Paints India Ltd.'s Q3 FY24 revenues were in line but profitability was a miss. Volume growth in domestic decorative business stood at 9.1% (versus +12% for Asian Paints Ltd.).
On a four-year compound annual growth rate basis, volume/revenue increased 14.6/14.5%.
Gross margin expanded by 640 basis points to 41.1% was better than 500 bps gain for Asian Paints. The company has gained from the benefits of deflationary price environment.
Berger continues to gain market share over past five years and now the share stands at 20%.
Being the second-largest company in the domestic decorative industry, Berger is likely to benefit further from-
rising distribution reach,
strong presence in urban markets and
attractive offering across all categories.
We have downward revised our FY24/25/26E earnings per share by 2.0/5.1/5.1% to Rs 10.3/11.6/13.1 to factor in Q3 performance. Valuing the stock at 45 times FY26E EPS to arrive at target price of Rs 590. Downgrade to Reduce.
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