- 16 May 2023
- ICICI Securities
Decorative paints business drives Q4 performance
BERGEPAINT - 551 Change: 12.05 (2.24 %)News: Berger’s consolidated revenue grew 11.7% YoY to Rs 2443.6 crore led by overall volume growth of 11.1%. Subsidiaries’ sales (~10% of revenue) came in at ~Rs 254 crore, down by ~2.% YoY. The overseas subsidiaries sales were impacted by inflation headwinds in Nepal and uncertain situation in Europe.The gross margin improved 93 bps YoY supported by lower raw material prices and improved product mix. However, the EBITDA margin declined 75 bps YoY (up 211 bps QoQ) to 15.1% due to higher ad expenses and higher overhead expenses on account of new plant in Sandila. PAT declined 15.6% YoY to Rs 186 crore due to higher depreciation and finance cost on Sandila project. The company also accounted for share of loss of associate company of Rs 25 crore during the quarter. The company announced a total divided of Rs 3.2/share for FY23.
Views: We believe Berger Paints' growth of 11% (vs. I-direct estimate: 12%) YoY in Q4FY23, was lower than the market leader's volume growth of 16%. However, the company reported ~14% volume growth in its decorative paints segment led by better product mix during the quarter. On the margin front, we believe the benefit of lower raw material prices was partially offset by higher operating expenses. EBITDA margin at 15.1% is in line with its pre-Covid margin range. However, we believe higher ad expenses & overhead expenses will restrict the margin expansion, going forward. On the demand front, the company's focus on adding retail outlets and new product launches is likely to result in better revenue growth, going forward.
Impact: Neutral