Analysts turn bullish on Asian Paints as demand, margins show fresh colour

Asian Paints Q2 review: Brokerages have turned more upbeat on Asian Paints Ltd after the company reported a strong September quarter (Q2FY26) result, marking a clear revival in demand and margin gains aided by easing input costs and operational efficiency.

 

Analysts say multiple growth levers, from stabilising rural demand to a rebound in industrial and automotive coatings, are coming together to put fresh colour on the paint major’s outlook, even as competition in the sector remains intense.

 

ICICI Securities, which had upgraded the Asian Paints stock in June 2025, said several tailwinds are now in place. “There are green shoots in demand across urban as well as rural markets, while the B2B and industrial segments, especially automotive, continue to perform well,” it noted. The brokerage highlighted that backward integration projects such as the white cement unit (expected in Q3FY26) and the VAM/VAE facility (on track for H1FY27) could meaningfully expand margins by over 150 basis points (bps) once stabilised.

 

 

The brokerage also pointed to lower raw material costs and a favourable base in the second half of FY25 as additional support. “We remain constructive. Maintain a non-consensus positive stance,” ICICI Securities said, reiterating its ‘Add’ rating, while commending Asian Paints’ renewed focus on brand building, innovation, and regionalisation. The brokerage also lifted its target price to 3,000, from 2,650 earlier.

 

Nuvama Institutional Equities called the company’s Q2FY26 performance a “shining set of numbers,” noting that revenue and Ebitda growth of 6 per cent and 21 per cent, respectively, comfortably beat expectations. Decorative volumes rose 10.9 per cent year-on-year (Y-o-Y) -- a seven-quarter high and well above the 4-5 per cent growth anticipated.

 

Gross margin improved 242 bps to 43.2 per cent, and Ebitda margin expanded to 17.6 per cent, aided by “operating, sourcing, and formulation efficiencies along with stable raw material prices,” Nuvama said. The brokerage raised FY26-FY28 earnings estimates by 3-4 per cent, lifted the target price to ₹3,390 (from ₹2,935 earlier), and retained its ‘strong anti-consensus Buy’ rating. “We expect further improvement in demand trends, particularly in urban markets,” it added.  ALSO READ | Honasa Consumer: ICICI Securities sees 42% upside post Q2; Emkay cautious 

Those at Motilal Oswal Financial Services said the September quarter marked a turnaround, with standalone sales growing 6 per cent annually – the first positive print after six quarters of decline. Domestic decorative volumes grew 11 per cent, while international sales were up nearly 10 per cent.

 

“Extended monsoon impacted early-quarter demand, but a visible recovery was seen in September and October, supported by festive demand and improved consumer sentiment,” the brokerage noted. Gross margin expanded 240 basis points to 43.2 per cent, leading to a 21 per cent rise in Ebitda to ₹1,503 crore.

 

Motilal Oswal expects mid-single-digit value growth and high-single-digit volume growth for FY26, maintaining its Ebitda margin forecast at 18–20 per cent. “With the worst of demand pressure behind and competitive intensity stabilising, Asian Paints is well positioned to sustain steady growth,” it said, raising the target price to ₹3,000 while keeping a ‘Neutral’ stance due to elevated valuations.

Asian Paints' Strong Q2 performance

 

Asian Paints reported a consolidated revenue of ₹8,513.7 crore for Q2FY26, up 6.4 per cent year-on-year, while profit after tax surged 43 per cent to ₹993.6 crore. Operating profit rose 21 per cent to ₹1,503 crore, taking margins to 17.7 per cent from 15.5 per cent a year earlier.

 

The company’s standalone business posted a 5.8 per cent rise in revenue to ₹7,335.9 crore, with net profit up a robust 60 per cent at ₹955.6 crore. 

 

The international business grew 9.9 per cent Y-o-Y, led by South Asia, the Middle East and Africa, while the industrial coatings segment logged double-digit growth, driven by the automotive and protective coatings verticals.  ALSO READ | Ashok Leyland at crossroads after Q2: Buy for growth or reduce for caution?

CEO upbeat on innovation, cost control

 

Managing director and chief executrive officer (CEO) Amit Syngle attributed the strong show to focused innovation and regionalisation.

 

“This was a quarter of focused innovation, good execution and regionalisation of initiatives, resulting in a strong performance,” he said.

 

“We saw an improvement in our domestic decorative business with a double-digit volume growth of 10.9 per cent and a 6 per cent increase in value, despite the challenges posed by an extensive and prolonged monsoon. This growth was driven by our ability to generate demand across urban and rural areas through various regional activations and intense marketing and brand building measures,” Syngle added.

 

He said growth was further aided by “enhanced performance in our Automotive and Industrial Protective Coatings segments,” which helped deliver a 6.7 per cent value growth in the domestic coatings business.

 

While the Home Décor segment continues to face headwinds, Syngle said the company’s Beautiful Homes stores are showing encouraging traction. “Our ongoing efforts to elevate cost efficiencies have delivered positive results, allowing us to increase our profit margins even as we increased investments in our brand and retailing initiatives,” he said.

 

With the demand environment stabilising and raw material costs benign, brokerages believe Asian Paints has moved past the dull patches of the last year. As analysts at ICICI Securities summed up, the company’s steady execution, backward integration, and brand strength “position it well to sustain growth momentum and defend its market leadership.”