Berger Paints Q2 Results Review - Performance Below Estimate; Maintain 'Accumulate': Dolat Capital

Dolat Capital Report

Berger Paints India Ltd.’s Q2 FY24 results were below our estimate. Volume growth in decorative business stood at 10.9% (versus + 6% for Asian paints Ltd.) On a four-year compound annual growth rate basis, revenue increased 14.7%. 

Gross margin expanded by 580 basis points to 41.1% was lower than 760 bps gain for Asian Paints. The company has gained from the benefits of deflationary price environment. Going ahead, we believe stable raw material cost environment would help the company to maintain gross margin at higher levels. 

Being the second-largest company in the domestic decorative industry, Berger Paints is likely to benefit further from

1. rising distribution reach,

2. strong presence in urban markets and

3. attractive offering across all categories. 

We have downward revised our FY24/25E earning per share by 0.7/1.9% to Rs 10.5/12.2 to factor in Q2 performance and introduced FY26E EPS at Rs 13.8.

Valuing the stock at 45 times FY26E EPS to arrive at target price of Rs 621. Maintain 'Accumulate'.

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