HSBC has highlighted that cost inflation has returned to the paints sector after nearly four years, which could influence pricing strategies, demand trends and profitability across the industry.
The brokerage noted that examining previous cost cycles helps in understanding the interaction between volumes, pricing and margins during periods of input cost volatility. Rising raw material costs could force companies to consider price increases to protect margins.
HSBC believes that price hikes across the sector could lead to a narrowing of the volume–value gap, as higher product prices may weigh on demand growth even as revenues continue to expand.
The brokerage also pointed out that the market structure and competitive dynamics in the paints industry have evolved significantly compared with earlier cycles, which could influence how companies manage cost pressures and pricing decisions.
Within its coverage universe, HSBC said Asian Paints and Berger Paints could be potential beneficiaries of the changing dynamics, while maintaining hold ratings on both stocks. The brokerage has cut its target price for Asian Paints to ₹2,600 from ₹2,900 and for Berger Paints to ₹500 from ₹540.
Disclaimer: The views and investment tips expressed above are those of the brokerage and do not represent the views of this publication. This article is for informational purposes only and does not constitute investment advice.