Berger Paints India Ltd’s shares soared over 6% on Wednesday as volume growth bounced back to double-digits at 11.8% for the three months ended March (Q4FY26) after a gap of six quarters. The decorative paints segment saw traction in premium emulsion paints and new launches of Kolor Plus and Kolor Plus Glow. Volume growth was driven by both secondary sales and pre-buying by dealers ahead of price hikes, the management said.
Starting March, Berger has taken staggered price hikes of 11-12% to protect margins in the backdrop of rising cost inflation due to the West Asia war. Nearly 50-60% of Berger’s overall cost of goods sold basket has seen inflation of 20-22%. If costs don’t rise further, these price hikes can largely offset the adverse impact on margins.
But this is easier said than done. Berger expects volume growth to be stable-to-marginally lower. It believes that paints form 40% of total repainting costs, while labour forms 60%. So, a price hike of about 12% in paints would mean inflation to customers is only 4-5%, limiting demand elasticity.
But if El Nino plays out, demand in rural areas could come under pressure in H2FY27. Also, macro pressures building in the economy may weigh on demand for urban painting, which is a discretionary spend. So, price-demand elasticity will be tested.
Consolidated revenue grew 6% year-on-year to ₹2,868 crore in Q4FY26. Ebitda margin at 16.8% was ahead of consensus estimate of 15.8%, aided by operating leverage and sustained cost optimization.
Improving the profitability outlook led brokerages to upgrade their FY27/FY28 earnings-per-share estimates. Quicker pricing actions versus previous inflation cycles, along with formulation and sourcing efficiencies, are expected to protect profitability better than earlier anticipated, said Nirmal Bang Institutional Equities. Berger has maintained Ebitda margin guidance at 15-17%.
Importantly, Berger highlighted early signs of easing competitive intensity as pricing gaps between new entrant Birla Opus versus incumbents have narrowed. In fact, Birla Opus has raised prices more than peers, and has reduced rebates/dealer margins, which were higher earlier as companies competed for shelf space.
In a rub-off effect, shares of larger competitor Asian Paints, which is yet to announce Q4FY26 earnings, also rose 4%. Kansai Nerolac Paints stock was up 3%. Nuvama Research expects decent Q4FY26 earnings from Asian Paints which has also passed on cost inflation via price hikes. Nuvama expects FY27 to be a turnaround year for Asian Paints and Berger, and sees them posting double-digit revenue growth after three years. FY24-FY26 were tough for the sector amid intense competition and waning price discipline.
Berger is expanding in full swing eyeing potential market share gains, it added 2,600 tinting machines in Q4FY26, surpassing its target to install 1,000 machines; tinting machine installation crossed 10,000 units.
Retail footprint expanded to nearly 1,900 stores. Berger’s market share among listed peers remains slightly above 20%. Kolkata-based Berger expects its growth momentum in West Bengal to accelerate under the new government, with increased infrastructure spending. Berger has more exposure to this region than peers, with the state’s contribution to its sales being in double-digits.
From its 52-week low of ₹391.60 in March, the Berger stock has recovered to ₹517 currently. It trades at FY28 price-to-earnings multiple of 42, showed Bloomberg data.
Whether turnaround hopes materialize, would mainly depend on how demand pans out. Despite price hikes, forex volatility, and geopolitical uncertainty are near-term margin risks, so the signal is not fully green for investors.