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Double digit volume growth in topline: Berger paints reported consolidated revenue of Rs 2,520cr, which grew by 3.1% YoY led by standalone volume growth of 13.9% and consistent growth in most of its subsidiaries. However price correction to the tune of 5% dragged the value growth. Amongst segments, both decorative & industrial performed well and decorative continue to showcase double digit growth.

EBITDA remain impacted: Its gross profit grew by 5.3% YoY but declined by 13.4% QoQ to Rs 1,024.9cr while its margin improved by 83bps YoY but declined by 41bps QoQ to 40.7% So, improvement in gross margin as compared last year was because of low value inventory & efficiency but sequentially it was a muted show. Its EBITDA de-grew by 4.8% YoY & 26.9% QoQ to Rs 350.9cr with decline in margin by 117bps YoY & 274bps QoQ largely impacted because of higher spending on advertisements and brand building. PAT was mixed, as it grew by 19.7% YoY but declined by 25.8% QoQ to Rs 222.6cr while margins improved by 122bps but declined by 158bps QoQ.

Robust FY24 performance: For FY24, its revenue grew by 6% YoY with standalone volume growth of 11.6% while value growth was impacted due to price correction. Its gross profit grew by 18.6% YoY to Rs 4,553cr with improvement in margin by 434bps YoY due to reduction in raw material cost. Despite increase in employee, advertisement and other expenses its EBITDA grew in double digit with growth of 25.2% YoY to Rs 1,861cr and margin improved by 254bps led by efficiency and gain in premium products. PAT grew by 36% YoY to Rs 1,170cr with improvement in margin by 230bps YoY.

Key Highlights: 1) High volume/low value products like Tile Adhesive & Admixtures saw higher growth during the quarter. 2) No price reduction in the luxury category. 3) Decorative business had a strong double digit volume growth and industrial business lines continued their growth trajectory with improved profitability. 4) Strong traction in the economy segment impacted value growth. 5) Robust performance was seen in construction chemical & water proofing business. 6) Aggressive network expansion as it added 7300+ retail touchpoint and installed 7100+ color bank machine. 7) Present capacity stands at 1.27mn MT. 8) Brownfield expansion at a certain location and expansion at Panagarh, West Bengal is ongoing and also has acquired land in Orissa.

Outlook & Valuation: Berger Paints reported decent numbers for the quarter. Further, management remains positive on the growth prospects which would be driven by double digit volume growth for decorative segment, steady demand, innovations and expansion in distribution along with catch up in rural areas will help in aiding growth. On the financial front, we estimate its revenue/EBITDA/PAT to grow at 12.5%/16.1%/16.5% CAGR over FY24-26E and maintain a Buy rating with a revised target price of Rs 627.

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