Paints Disruption Fades, Analysts Upgrade Asian Paints and Berger

In a recent report, Nomura's India Consumer Equity Research Analyst Mihir Shah has provided an insightful analysis of the major shifts shaping India's consumption landscape. Notably, Shah has upgraded both Asian Paints and Berger Paints, a move that the market considers a bold contrarian call.

The primary reason behind Shah's upgrade is the lack of disruption from Birla Opus, a new entrant backed by a ₹10,000-crore investment. Contrary to initial fears, Shah notes that the product prices and dealer margins of Birla Opus are only marginally higher than the legacy players. Even during the aggressive launch phase, the margins for Asian Paints and Berger dipped by only 100-200 basis points, while the growth slowdown was more a function of weak consumption across categories.

Furthermore, Shah's dealer checks indicate that the "parabolic growth" seen by the new entrants has started to moderate, and lost dealers are now returning to the fold. While the competitive intensity remains high, the disruption is no longer a significant concern.

In the jewellery space, Shah remains positive on Titan, stating that the threat from lab-grown diamonds is overstated. Titan's studded jewellery has grown at a CAGR of 19% over the past 12 quarters, and there is "very little evidence" that lab-grown diamonds are substituting Titan's offerings. The company's strong brand trust and organized-market tailwinds continue to work in its favor.

Shah also maintains a positive outlook on Britannia, even after the recent exit of its CEO Varun Berry. The company is a key beneficiary of the GST rate cut, with 65% of its portfolio priced between ₹5-₹10. Shah believes the new leadership can sustain the momentum, as the team is strong, the growth opportunities are clear, and the journey to becoming a total foods company continues.