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Steady volume growth: Berger paints reported consolidated revenue growth of 7% YoY/4.1% QoQ to Rs 2,881.8cr and its standalone revenue growth grew by 6.4% YoY with volume growth of 9.1% YoY. Amongst segments, both decorative and industrial segments continued to perform well, despite price cuts taken by the company. Additionally, decorative volume grew in double digit and consistent growth in protective coatings, automotive & general industrial segment as well as revival in powder coating segment aided sentiments. In the International market, strong growth was reported from Bolix Poland while subdued performance continued from Nepal business.

Robust improvement in margins: It reported consolidated gross profit of Rs 1,183.7cr, up by 26.7% YoY/4% QoQ with margin at 41.1%, which was flat sequentially witnessing an increase of 638bps YoY led by decline in raw material prices. Also, EBITDA grew by 37.3% YoY/1.3% QoQ to Rs 480cr and margin came in at 16.7%, up by 368bps YoY and was down by 46bps sequentially. The growth was led by better product mix and decent volume growth however increase in advertisement spends led by ICC Cricket World Cup in the quarter impacted a bit. Further, consolidated PAT grew by 49.2% YoY/2.7% QoQ to Rs 300.2cr.

Key Highlights: 1) India operation maintained its improved market share around 20%. 2) Product mix saw an improvement for the quarter. 3) Economy segment seeing good traction. 4) Price cuts taken for several products led to the gap between value and volume growth. 5) Advertisement expense as a % of sales was about 1.5%. 6) Amongst decorative, wood coatings, construction chemical & waterproofing business had another quarter of stellar performance. 7) Amongst the industrial segment, demand revival of the fan industry and new customer acquisition aided growth for powder coating business. 8) Tier 2 & Tier 3 showed better performance as compared to Tier 1. 9) It added ~2300+ retail touchpoints and installed ~1300 color bank machines in Q3FY24.

Outlook & Valuation: Berger Paints reported yet another quarter of decent numbers led by higher single digit volume growth and robust margin improvement as compared last year. Going forward, demand to remain robust driven by both its segments as well as pickup in rural demand. Additionally, the management expects higher government spending would aid growth for paints and coating segment along with its focus on adding more products, improving mix and expanding reach. However, on margins they do not expect much improvement while it could sustain near to similar levels of 16-18%. On the financial front, we estimate its revenue/EBITDA to grow at 17.2%/27.4% CAGR over FY23-26E and maintain a Buy rating with a price target of Rs 693.

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