The stock of Berger Paints has rallied nearly 70 per cent since the March 2020 lows. Improved demand conditions for housing and the festival season last year helped the company deliver strong performance, particularly in the last two quarters since the economy opened-up. However, investors can consider partially exiting the stock at this point for three main reasons.

One, the valuation is quite steep. It is trading at 107 times its trailing 12-month earnings while its peer and market leader Asian Paints is trading at 83 times . Two, crude oil prices have also started rising since November last year, pushing up input prices for paint companies.Three, the paint industry is highly competitive and in recent years, new players, including Grasim and JSW Paints, have entered the market. This could not only impact revenue growth/market share, but margins as well due to pricing pressure and higher marketing/sales costs.

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