Berger Paints jumps 4% as Q3 net profit zooms 49%

Berger Paints jumps 4% as Q3 net profit zooms 49%

Gross margin expanded 638 bps due to favorable RM costs and is at a 10-quarter high.

Berger Paints shares gained 4 percent in early trade on February 7 after the company posted a 49 percent year-on-year rise in its consolidated net profit to Rs 300.16 crore for the third quarter of this fiscal.

But, by 10.05am, Berger Paints had trimmed its early gains to trade at Rs 559.15, higher by 0.6 percent, on the NSE.

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Also read | Berger Paints Q3FY’24 net profit jumps 49% to Rs 300 crore

Revenue from operations also grew 7 percent to Rs 2,881.83 crore during the October-December period, the company said in a regulatory filing. Its earnings before interest, taxes, depreciation and amortisation (EBITDA), excluding other incomes, recorded a surge of 37.3 percent to Rs 480 crore during the period under review as compared to the corresponding quarter last year.

Decorative volumes grew in double digits, with overall volumes at 9.1 percent YoY. Volume/value gap narrowed to 2.7 percent from 8.1 percent in Q2, aided by mixed improvement. Its gross margin expanded 638 bps on favourable RM costs and is at a 10-quarter high.

The earnings came in-line with Nuvama Institutional Equities’ estimates. “Decorative business maintained its outperformance over other businesses and reported double digit volume growth and is likely to sustain its demand momentum in Q4FY24 as well. Economy segment grew at a faster pace compared to premium and luxury,” said the brokerage.

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Nuvama maintained its ‘hold’ rating on Berger Paints, with a target price of Rs 615. Berger is taking proactive steps in terms of distribution expansion and passed on margin expansion in the form of price cuts (of around 2.7 percent). However, Grasim’s entry into the industry remains a key risk, it said.

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