Paint Sector Check - Operating Profitability To Drop By Another 200 Basis Points By FY26: CareEdge's Analysis

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..CareEdge Research Report.After showcasing significant revenue growth in FY22 and FY23 post-pandemic, the growth rate of long entrenched players moderated to mid-single digits in FY24 and slipped into a negative zone in H1 FY25 amid intensifying competition. However, revenue in H2 FY25 is expected to witness a rebound on YoY basis on the back of benefits arising from the price hike taken in July-August 2024.The entry of new players has sparked a surge in capital expenditure and heightened competition within the sector. Players are expanding their capacities, growing their dealer network, ramping up sales teams and accelerating ad spending in a bid to counter competition and secure market shares. Amid these developments, we expect a shift in cost structures, with ad and sales promotion spending of players likely to increase by 100 bps – 200 bps (as a percentage of revenue) in the medium term.Consequently, paints companies' operating profitability margin, which reduced to ~16% in H1 FY25 from ~20% in FY24, is expected to further moderate to ~14% by FY26. However, strong credit risk profile characterised by conservative capital structure and healthy liquidity are expected to aid the incumbents in navigating through the increased competitive landscape whereby operating profitability margins are likely to moderate in the near to medium term. With existing and new players going for massive capex, the share of organised players is set to go up to ~80% in the medium term..Click on the attachment to read the full report:.Epack Durable Gets 'Buy' As ICICI Securities Initiates Coverage; Sees 16% Potential Upside.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Paint Sector Check - Operating Profitability To Drop By Another 200 Basis Points By FY26: CareEdge's Analysis

With significant investment plans by new players having substantial financial resources, the industry is likely to experience changes in market share, says CareEdge

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