'Hold' Berger Paints Shares Maintains Nirmal Bang; Awaits Better Entry Point— Check Target Price

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Nirmal Bang Report

While ROEs in the business were always relatively lower than FMCG peers, earnings growth was significantly superior at ~16% CAGR over the last 10 years; this is now decelerating. Even on a weak base of FY25 (flattish EPS), earnings growth at 13% CAGR over FY25-FY27E is considerably lower than the past, while ROEs remain low at ~18-20% (a considerable discount to the average of ~23% during the last 10 years).

While the management commentary continues to be positive, heightened competitive intensity from new and existing players, and its possible impact on realizations, volume, and margins remain key monitorables.

Valuation is not cheap at ~42x FY27E EPS. Instead of valuing the company at a 15% discount to Asian Paints multiples as in the past, we are now valuing it at ~25% discount to its historical 10-year average multiples, effectively arriving at a target multiple of 45x Jun-27E EPS.

Our target price is Rs 600 — a 10% upside to the current market price. We maintain a Hold rating as we await a better entry point.

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