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Consistently surpassing industry growth rates and gaining the market share

Berger Paints Limited, incorporated in 1923, is one of the leading manufacturers and sellers of paints and varnishes in India with an established brand. It is present in decorative paint segment (~80% of the sales) and industrial segment. Berger has 29 manufacturing plants in India (including plants of subsidiaries in India), two in Nepal, one each in Poland and Russia, and around 184 stock stations. Its decorative segment includes brands such as ‘Weathercoat’, ‘Luxol’, ‘Silk’ and ‘Easy Clean’. The Berger group also has an international presence in eight countries, including Russia, Nepal, Bangladesh, and in certain countries of Europe.

Investment Rationale

Investment Rationale Expanding distribution network: Berger Paints boasts a robust distribution network throughout India, comprising approximately 64,000 dealers and retailers. This extensive network has significantly enhanced the company's presence in the decorative segment. Additionally, Berger has strategically established manufacturing facilities across various regions to effectively meet local demand. The company is also focused on expanding its sales through the introduction of company-owned and operated (COCO) stores nationwide. Looking ahead, Berger plans to further extend its network in areas where it currently has limited presence.

Diverse product and brand portfolio: Berger’s revenue is primarily driven by the decorative paint segment (~80% contribution to revenue mix), though it also operates in other areas such as general industrial and automotive paints, powder coatings, and protective coatings. The company’s research and development (R&D) initiatives enable it to consistently introduce innovative products that cater to changing customer needs and help expand its diverse product portfolio. Berger offers a variety of products, including water-based, solvent-based, as well as interior and exterior paints. Some of its well-known brands are ‘Weathercoat,’ ‘Luxol,’ ‘Silk,’ and ‘Easy Clean.’

Continuous addition of capacity: Berger has consistently expanded its capacity (current capacity- ~1.5 Mn KL), both through organic growth and acquisitions, to address the rising demand driven by increased per capita paint consumption. The company is currently developing a greenfield project in Panagarh, West Bengal, with an estimated cost of approximately 500 crore, fully financed through internal accruals. This facility is expected to be operational by March 2026. Following this, Berger plans to establish a manufacturing unit in Odisha with a projected capex of around 1,460 crore and an annual capacity of 410,000 KLPA, fully financed through internal accruals and existing liquidity

Outlook & Valuation

Berger Paints has demonstrated resilient performance, consistently surpassing industry growth rates and achieving the highest market share among listed competitors. 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 to grow at 13%/15.9%/ 16.3% CAGR over FY24-26E and maintain a Buy rating with target price of Rs 655.

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