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ICICI Securities Report
MRF Paints, a 100% subsidiary of MRF Ltd., has a 0.7% share of the paint market in India in FY22 and is largely focused on the southern region of the country.
It operates under the brand equity of MRF Vapocure and it has likely higher market shares in industrial paints and wood coatings in south India than its reported pan India share of the total paint market.
It is steadily introducing new paints and is now present in floor paints as well as wall paints. We note the company’s gross margin is ~50%, i.e. in line with its peers, indicating strong brand equity as well as similar trade margins /schemes.
However, its Ebitda margin (10-12%) is significantly lower than peers due to:
likely higher ad-spend, and
lower scale of operations.
While increase in competitive intensity is likely to hurt most incumbents (including MRF Paints), we believe the smaller paint companies will be acquisition targets for new entrants and large players, hence they are likely to maintain higher valuation multiples.
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