Skip to content

    Berger Paints

    BERGEPAINT
    Consumer Durables·11 Feb 2025
    Management Summary

    Berger Paints reported a Q3 FY25 with robust 7.4% volume growth in its decorative segment, contributing to a consolidated sales growth of 3.2%. Despite a volume-value gap driven by price reductions and a shift towards lower-value products, the company maintained its operating margin at 16.2%, within the guided range. Berger also improved its net cash position and continued to gain market share amidst increasing competition, with management expressing optimism for Q4 performance.

    Highlights

    5

    • High single-digit volume growth of 7.4% in the decorative segment for Q3 FY25.

    • Protective business demonstrated strong performance in the quarter.

    • Company continued to gain market share in Q3, now exceeding 20%.

    • Operating margin of 16.2% remained within the guided range (15-17%) and improved sequentially.

    • Net cash position significantly improved to ₹377 crores at the end of Q3 FY25, up from ₹242 crores in Q2 FY25.

    Concerns

    4

    • Volume-value gap in Q3 due to a 4-5% product price decrease and stronger sales of lower-value, high-volume products.

    • Gross margin contracted marginally year-on-year due to product price reductions undertaken in the last financial year.

    • Operating margin was lower on a year-on-year basis for Q3 FY25.

    • Geopolitics and currency depreciation are identified as likely risks for future quarters.

    Key financials

    Metrics

    6

    Periods

    2

    Headline

    2
    • Volume Growth (Decorative)
      7.4%
      YoY+7.4%
    • Net Cash Position (Dec 2024)
      ₹377 Cr

    Q3 FY25

    4
    • Value Growth
      40%
      YoY+0.4%
    • Gross Margin
      39.8%
    • EBITDA Margin
      16.2%
    • Consolidated Sales Growth
      3.2%
      YoY+3.2%

    Segment breakdown

    Decorative Segment
    7.4% Volume Growth
    Protective Business
    strong qualitative Performance
    Construction Chemical/Waterproofing
    strong double digit qualitative Growth
    Industrial Business
    strong qualitative Performancemuted qualitative Automotive/General Industrial/Powder Coatings Growth
    List

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Cash ₹377 crores

    Net cash position improved to ₹377 crores at the end of Q3 FY25, up from ₹242 crores in Q2 FY25.

    Guidance & targets

    4
    CategoryTargetPriority
    Margin
    Operating Margin
    15-17%
    		High
    Volume
    Q4 Volume Growth
    double digit figure
    		Medium
    Volume
    Q4 Value Growth
    bit single digit growth
    		Medium
    Volume-Value Gap
    Sustained Volume-Value Gap
    2-2.5%
    		High

    Q4 Volume Growth

    next quarter
    Current7.4% (Q3 Decorative)
    TargetDouble-digit growth

    Why it matters

    To assess the effectiveness of strategic initiatives and overall demand recovery.

    Abhijit Roy: You know we are at 7.4 or something in volume. I expect that we will possibly go up more towards the double digit figure in terms of volume, growth, and in value growth.

    How to verify

    key_financials.metrics[label='Volume Growth (Decorative)']

    Risks & concerns

    4
    RiskSeverity

    Competition from new entrant (Birla Opus)

    New entrant has gained an estimated 3.5% market share YTD, impacting existing players, and is expected to continue impacting Berger's growth rate by 2-3%. — Both acknowledged

    high

    Geopolitics and currency depreciation

    Identified as likely risks, though management downplays immediate impact on margins due to limited import dependency and price adjustments. — Management acknowledged

    medium

    Market slowdown

    Viewed as a temporary issue, with expectations for improvement from April onwards following budget announcements. — Management downplayed

    medium

    Impact of product price decreases

    A 4-5% price drop in earlier quarters created a volume-value gap, but this impact is expected to wane from mid-January. — Management downplayed

    medium

    Q&A highlights

    7

    “Abhijit Roy: It's our estimate is that you know, Virulla has got about on a Ytd basis about 3.5% of the market, right? You know, which is. if you consider 5 main players which consider, you know, which produce the result. and take also Birla in that which is the 6th player. Then in that 6 players they have about 3.5%”

    Analyst questions the impact of a significant new competitor; management quantifies their estimated market share and acknowledges impact, but states Berger's impact is less.

    asked by Aniruddha Joshi

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Highlights

    Berger Paints reported a high single-digit volume growth of 7.4% in its decorative segment for Q3 FY25, contributing to a consolidated total sales growth of 3.2%. Despite this, value growth for the quarter was a modest 0.4%. The company's gross margin stood at 39.8% and EBITDA margin at 16.2%, both within the guided range of 15-17%, though operating margin was lower year-on-year.

    02

    Analysis of Volume-Value Gap

    The observed volume-value gap is primarily attributed to two factors: a 4-5% product price decrease undertaken in earlier quarters and a stronger sales mix towards high-volume, lower-value products such as tile adhesives and texture coatings. Management clarified that this gap is not due to mix deterioration but rather a shift in product categories. The 4-5% price decrease impact is expected to wane from mid-January, but a 2-2.5% volume-value differential is anticipated to persist for the next few quarters.

    03

    Competitive Landscape and New Entrant

    The company acknowledges the impact of a new entrant (Birla Opus), estimating their market share at approximately 3.5% YTD among the top six players. While this competition affects all existing players, Berger believes its impact is slightly less. Management also confirmed they are not pursuing the acquisition of AkzoNobel's decorative business, deeming it not a strategic fit.

    04

    Strategic Growth Drivers: Distribution & Urban Initiatives

    Berger's strong volume growth, outperforming peers, is attributed to aggressive distribution expansion and successful urban initiatives. The strategy involves gaining a foothold in key urban markets, ensuring dealer stocking, and driving sales from these counters. The company added over 2,000 retail touchpoints and installed around 1,800 color bank printing machines, with urban initiatives progressing well.

    05

    Outlook for Q4 FY25 and Margin Stability

    Management expects sequential improvement in Q4 FY25, projecting double-digit volume growth and single-digit value growth. They are confident in maintaining operating margins within the 15-17% band, citing limited impact from currency depreciation due to low import dependency (25-30% of RMC) and balancing price adjustments. The temporary market slowdown🌐 is also expected to ease from April onwards.

    06

    Improved Net Cash Position

    The company significantly improved its net cash position, which increased to ₹377 crores at the end of December 2024, up from ₹242 crores in September 2024. This enhanced liquidity provides financial flexibility for future operations and growth initiatives.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.