Berger Paints reported a stable September quarter 2023 supported by double-digit volume growth. Though revenue growth was muted at 3.6% YoY in Q2FY24, operating margin expanded more than three percentage points and net profit increased 33% YoY. Headquartered at Kolkata, Berger Paints India has 16 manufacturing units across India, 2 in Nepal, 1 each in Poland and Russia. The company has a countrywide distribution network of more than 25,000 dealers and 162 stock points.
Decent Q2FY24 performance, low raw material cost aids margin expansion
Berger Paints reported volume growth of 10.9% YoY and revenue growth of 3.6% YoY in Q2FY24. Revenue from operations came in at Rs 2,767 crore in September Quarter 2023 compared to Rs 2,671 crore in the same period previous year. According to the management, slower revenue growth was mainly due to extended and sporadic monsoon, delayed festive season and high base effect. The company undertook price increases in Q2FY23 last year which led to higher topline growth. Because of extended monsoons, lower offtake of exterior and interior premium emulsion and higher sales of economic categories such as economy emulsion, primers, distemper and pati, Berger Paints reported lower YoY revenue growth but with a double-digit volume growth in September Quarter 2023.
Operating margins came in at 17.12% in September Quarter 2023 compared to 13.63% corresponding quarter previous year driven by lower cost of material and strong performance from new high margin products.
Speaking on new products, Abhijit Roy, Managing Director and CEO at Berger Paints said, “Weather Coat Long Life 15 and Field Glamor Dazzle, these are very highly profitable and are growing at a very rapid pace in certain markets especially in the east which has helped us to shore up margins.” Net profit rose 33% YoY to Rs 292 crore in Q2FY24 compared to Rs 219 crore in the same period previous year.
Market share of 20%, greenfield capacity expansion and strong Q3FY24 expected
According to the management, Berger Paints has breached market share of 20% by the end of H1FY24 in India. One of the main reasons is Berger Paints strong distribution network with 60,000 touchpoints. Speaking on network expansion, Roy said, “Expansion of network is one of the major drivers for us and I think even now there is a lot more scope to improve on this area because there are a lot of gaps in many states where we can do much, much better than what we are doing.” The company added 1300 colour bank machines in Q1FY24 and 1700 colour bank machines and 2000 retail touch points in Q2FY24. The management intends to add a similar number of touch points and colour machines also in Q3FY24. On market share gain, Roy further added, “Construction chemical business which is growing at a rapid pace is helping us to actually accelerate our growth because now it has reached a level which is significant and is helping the overall growth criteria.” Berger Paints is also expanding its capacity by setting up a new plant in Panagar (West Bengal) which will start in the next six months. The Panagar plant will manufacture industrial paints and construction chemicals with a capacity of about 3500 scale per metric tonne per month. Expected completion is by the end of 2025 or beginning of 2026. Another greenfield facility is also coming up near Bhubaneswar (Orissa) for manufacturing of both decorative and industrial paints. The plant is expected to be completed by 2027. Brownfield expansion is also being undertaken in existing facilities in Hindupur and Vicera expected to be completed in FY25.
The management expects improvement in decorative demand in Q3FY24 on the back of festive season and improvement in rural demand. Automotive business is expected to continue with its double digit growth in Q3FY24. Protective coating business is also expected to do well on account of high government spending and is expected to continue with its double-digit growth performance in Q3FY24.
