Asian Paints tanks 7% post Q3 on weak demand outlook despite strong margins

Asian Paints share price today: Asian Paints shares slid sharply, falling 6.62 per cent to an intraday low of ₹2,451 on the BSE, making it the top loser on the Sensex.

Asian Paints’ December-quarter performance has sharpened a familiar debate on Dalal Street – are strong margins enough when demand recovery remains uneven? While most brokerages agree that profitability is holding up better than expected, concerns around subdued volume growth, a cautious management commentary, and industry-level headwinds have tempered enthusiasm for the stock in the near term.

 

Meanwhile, Asian Paints shares slid sharply, falling 6.62 per cent to an intraday low of ₹2,451 on the BSE, making it the top loser on the Sensex. At around 9:30 am, the stock was trading 5.72 per cent lower at ₹2,474.65, even as the Sensex rose 0.74 per cent to 82,460.44.

 

 

The country’s largest paint maker reported mid-single-digit revenue growth in Q3FY26, weighed down by fewer painting days during a shorter festive season and extended monsoons. Volumes grew in high single digits, but fell short of Street expectations, leading analysts to reassess growth assumptions even as margins touched multi-quarter highs.

Demand recovery uneven, guidance underwhelms

Nomura flagged that Asian Paints’ Q3 volume growth of 8 per cent Y-o-Y was below its estimate of 10 per cent, attributing the miss to a truncated festive calendar and prolonged rains in October. Consolidated sales growth of 3.7 per cent also trailed both Nomura and consensus expectations. While management indicated that demand improved post-October and continued into January, its near-term guidance of mid-single-digit value growth failed to excite the Street.

 

Motilal Oswal echoed this cautious tone, describing the quarter as ‘lacklustre’ despite a favourable base. The brokerage noted that domestic decorative volumes rose 8 per cent, well below its 12 per cent estimate, and said the commentary on recovery was ‘uninspiring’ compared to the more constructive outlook after the September quarter. Asian Paints now expects volumes in the 8-10 per cent range and value growth of around 5 per cent in the near term.

 

ICICI Securities, too, found the growth guidance underwhelming, particularly against the backdrop of rising infrastructure spending, improving real estate activity, and a potential revival in repainting demand after a prolonged lull. Elara Capital went a step further, arguing that the industry may be facing structural shifts such as a delayed repainting cycle and lower discretionary spending during social occasions, leading it to reiterate a bearish stance.  ALSO READ | Tata Consumer Q3 review: Brokerages upbeat on execution-led growth story

Margins emerge as the clear positive

 

If growth disappointed, margins provided a strong counterbalance, analysts said. Gross margin expanded nearly 200 bps Y-o-Y to 44.4 per cent, aided by benign raw material prices and a richer premium mix. Operating margin hovered around 20 per cent, at the upper end of management’s guided band of 18-20 per cent.

 

Nomura highlighted that both gross and operating margins were in line with its forecasts and are likely to be sustained, even as the company continues to invest aggressively in branding, new product launches, and services. Motilal Oswal also pointed to steady margin expansion, noting that Ebitda rose 9 per cent Y-o-Y despite muted topline growth.

 

ICICI Securities analysts believe margin prospects could further improve as competitive pressures ease. It cited early signs of profitability focus by Birla Opus, including price hikes and a slowdown in dealer expansion, as indicators that industry-level pricing discipline may improve over time.

 

Competition still high, but peak may be behind

 

Competitive intensity remains a key swing factor for Asian Paints. Nomura argued that while competition is still elevated, peak disruption may be behind the company. Despite aggressive investments by new entrants, Asian Paints has retained its moat, supported by brand strength, a wide distribution network, and an expanding services portfolio.

 

The company added 3,000-4,000 retailers during the quarter, taking its total reach to around 160,000 outlets. Innovations and differentiated products now account for about 16 per cent of sales, while services such as Total Assure and Beautiful Homes continue to gain traction. Asian Paints is also widening its B2B and project exposure and strengthening backward integration through new manufacturing capacities.

 

Elara, however, remains sceptical, cautioning that structural challenges and sustained competition could cap growth, even if margins remain resilient.

 

Valuations reflect divided views

 

Brokerage recommendations reflect this split outlook. Nomura maintained a non-consensus ‘Buy’, revising its target price marginally lower to ₹3,250, valuing the stock at 60 times December 2027 earnings. ICICI Securities retained an ‘Add’ rating with a DCF-based target of ₹3,000, betting on a cyclical recovery in FY27-28.

 

Motilal Oswal reiterated ‘Neutral’ with a target of ₹2,950, citing slower demand recovery and competitive pressure, while Elara Capital stuck to a ‘Sell’, lowering its target to ₹2,517.

 

That said, brokerages remain clear that Asian Paints’ profitability engine remains robust, but a decisive re-rating will likely hinge on a clearer, broader-based demand revival. Until then, margins may support the stock, but growth will decide its next leg.   

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