Berger Paints, the second largest paint company in India, known for brands like Silk and WeatherCoat, does not see a reason to be overtly worried due to the entry of Fevicol manufacturer Pidilite in the decorative paints market.
With a market share of over 18 percent, Berger is the second-largest paint manufacturer in India.
In an interaction with CNBC-TV18, Berger Paints MD & CEO Abhijit Roy said that competition will only intensify towards the end of the next financial year but there is no reason to worry.
"There might be some amount of intensification of competition towards the end of this year when the entry of one of the largest players in the building material space happens, Roy said. "We may have to tactically do something, but that is something only time will tell.”
Berger's comments come on the heels of market leader Asian Paints' view that the entry of Pidilite is not something that "will shake the market in any way."
For the March quarter, Berger Paints saw 11 percent volume growth during the March quarter, while Gross Margin expanded by 90 basis points.
Roy is confident of double-digit growth in financial year 2024, adding that there will be improvement in margin going forward. He expects margin to remain in the 16-17 percent range, while market leader Asian Paints has guided for 18-20 percent EBITDA margin.
Aside of the one-time expenses which impacted margin during the March quarter, Berger could not pass on the benefit of lower raw material prices to consumers.
“We could not pass on the full price increases that happened in the raw material prices and that is why, for almost all paint companies, the gross margin got contracted," Roy said, adding that there is not an excessive amount that needs to be given away, and if prices hold at current levels, there would be status quo.
Brokerage firm Morgan Stanley has maintained its equalweight rating on the stock with a price target of Rs 611. It has highlighted gains in decorative market share, strong recovery in gross margin and a focus on accelerating the pace of network expansion as a key positives.
Shares of Berger Paints are trading 1.4 percent lower at Rs 620.1.
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