HDFC Securities: Berger Paints - Catalysts Missing For A Performance Encore
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HDFC Securities Report
Berger Paints India Ltd. has gone toe-to-toe with dominant leader Asian Paints Ltd. over FY10-20 despite the former's higher industrial salience, implying that its decorative biz has outpaced Asian Paints.
Growth has been smartly navigated alongside improving profitability via aggressive product innovation/premiumisation, efficient marketing and distribution expansion (gross margin/Ebitda and management fees differential has reduced from 856/924 basis point to 320/560 basis point over FY10-20).
While this narrative will continue, out performance is unlikely to be as steep over FY20-23, given that -
1. Berger Paints will have to contend with Asian Paints stepped-up aggression at the bottom of the pyramid and 2. margin levers seem to be missing.
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