(Reuters) -Berger Paints India reported a surprise second-quarter profit drop on Tuesday, hurt by weak demand as heavy monsoons deterred retail consumers from executing their painting projects.
Consolidated net profit for July-September fell 23.5% on-year to 2.06 billion rupees ($23.4 million). Analysts, on an average, had expected profit to rise to 2.78 billion rupees, per data compiled by LSEG.
Revenues grew 2% to 28.27 billion rupees, but fell short of analysts’ average estimate of 28.62 billion rupees.
“The extended monsoon season right through this quarter saw a muted demand scenario across most markets…,” said CEO Abhijit Roy.
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KEY CONTEXT
India’s $9.5 billion paints industry is struggling with weak retail demand as buyers switch to cheaper labels amid rising competition from new entrants such as Grasim Industries’ Birla Opus.
Analysts had expected Berger Paints to weather the retail weakness better than peers such as Asian Paints, helped by its wider client base, after monsoon rains hit demand and weighed on rivals such as Kansai Nerolac.
PEER COMPARISON
Valuation (next Estimates (next 12 Analysts’ sentiment
12 months) months)
RIC PE EV/EBITDA Revenue Profit Mean No. of Stock to Div
growth (%) growth (%) rating* analyst price yield
s target** (%)
Berger Paints India 46.21 29.00 8.41 11.00 Hold 22 0.94 0.71
Kansai Nerolac 26.61 16.54 6.77 19.98 Hold 11 0.90 1.00
Paints
Asian Paints 53.44 35.53 6.55 9.54 Hold 34 1.05 0.99
Akzo Nobel India 31.04 19.99 6.28 8.22 Buy 2 0.85 3.07
* The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
JULY-SEPTEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 87.8950 Indian rupees
(Reporting by Hritam Mukherjee in Bengaluru)
