Berger Paints - Transitory Issues Impacted Q3; Cyclical Challenges Emerge For FY24: ICICI Securities

Due to prolonged monsoon, revenues of exterior emulsion were affected.
<div class="paragraphs"><p>Berger Paints containers. (Source:&nbsp; BQ Prime)</p></div>
Berger Paints containers. (Source:  BQ Prime)

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ICICI Securities Report

Berger Paints India Ltd.’s Q3 FY23 earnings declined 13.4% YoY due to-

  1. lower sales of exterior paints due to prolonged monsoon and

  2. high priced inventory impacted Ebitda margin by 239 basis points.

We note these issues are transitory and management is confident of double-digit revenue and volume growth in Q4 FY23 with margin recovery. However, we model key trends to unfold as-

  1. revenue growth in FY24- 25 is likely to be materially lower than FY22-23 due to negligible price hikes and lower volume growth with higher competitive pressures and revival of unorganised sector,

  2. likely inferior revenue mix due to inflationary pressures and likely higher discounting by smaller players at low end of market and

  3. with market leader planning to operate in Ebitda margin band of 17-20%, there is cap on Ebitda margin recovery for Berger Paints.

Our stance of industry profit pool shrinkage due to steep competitive pressures remain intact.

Click on the attachment to read the full report:

ICICI Securities Berger Paints Q3FY23 Results Review.pdf
Asian Paints Q3 Result Review - Multiple Triggers For Structural Correction In P/E Multiples: ICICI Securities


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