 "Nomura brushes off competition fears, turns bullish on Indian paint majors")
Nomura on Asian Paints, Berger Paints: Foreign brokerage Nomura has turned positive on India’s paints sector, saying the “fear of disruption” from new entrant Birla Opus has failed to materialise and the worst of competitive pressure is now behind.
The brokerage has upgraded Asian Paints and Berger Paints to ‘Buy,’ calling the stability in margins and dealer relationships a “re-rating event” for the industry.
The japan-based brokerage raised its target price for Asian Paints stocks to ₹3,100 (from ₹2,285 earlier) and for Berger Paints shares to ₹675 (from ₹500), implying upside potential of around 30-35 per cent. Both companies have been re-rated to reflect mean valuations – 60x forward earnings for Asian Paints and 55x for Berger – as the brokerage believes “major headwinds from competition are behind us”.
Competition fears fade
The sharp correction in paint stocks earlier this year was driven by investor anxiety over the aggressive entry of Birla Opus, which entered the decorative paints market in February 2024 with a mammoth ₹10,000 crore investment. Shares of Asian Paints and Berger Paints had fallen nearly 25 per cent and 11 per cent respectively since January 2024, as the Street feared price wars, margin compression and loss of market share.
However, Nomura says those fears have proved overblown. Despite the large investment and rapid distribution build-up by Birla Opus, which now has around 50,000 dealers and a mid- to high-single-digit market share, legacy players’ sales, margins and dealer networks remain largely intact.
“There has not been any major disruption on product prices, dealer margins or company profitability,” Mihir P Shah and Riya Patni, research analysts at Nomura said. The margin impact during FY25 was limited to 200 basis points for Asian Paints and 100 bps for Berger, still within their long-term normative range.
Birla Opus growth moderates
Nomura’s dealer channel checks indicate that Birla Opus’s parabolic growth has now slowed, with a low-single-digit decline in sales in Q2FY26 – something “not expected” given its small base and large investment outlay.
The brokerage adds that “easy pickings” from dealer additions are behind, and the new entrant’s expansion is now likely to be gradual rather than aggressive. Many dealers are reportedly returning to established brands after finding margins and sales throughput insufficient.
With distribution and capital investments largely complete, analysts at Nomura expect future competition to remain measured rather than disruptive, and say the market is entering a phase of healthy competition instead of a price war.
Moats hold firm
Nomura noted that India’s legacy paint majors have successfully weathered previous attempts at disruption by global and domestic entrants. Companies such as JSW Paints, Nippon Paints, Sherwin-Williams, and Jotun have all made limited inroads in the past two decades despite strong global brands and capital backing.
The reasons, Nomura argued, lie in formidable moats: a vast distribution network, entrenched dealer loyalty, tinting machine placement, and strong consumer trust built over decades. Birla Opus’s entry – despite being backed by a household name and ₹10,000 crore in investment – has further validated these structural advantages.
Valuations and growth outlook
Analysts at Nomura expect Asian Paints to deliver an earnings per share (EPS) compound annual growth rate (CAGR) of 10 per cent and Berger Paints around 12 per cent over FY26-28, factoring in continued high competition. Historically, both companies have grown earnings in the high teens (17-18 per cent) and sales at 1.5-1.8 times GDP growth.
“Peak competition is behind us,” Nomura said, adding that earnings could revert to early-to-mid-teen growth as the economy and demand normalise.