Weak demand weighs on Asian Paints Q3; analysts see more pain in near-term

On the bourses, Asian Paints share tanked up to 5.10 per cent to hit an intraday low of Rs 2,235 per share. Asian Paints share was also the top loser on BSE and NSE

Asian Paints, the country’s largest paint manufacturer, reported subdued Q3FY25 results, falling short of analyst expectations as weak demand in urban centres continued to weigh on the company’s performance.

 

On the bourses, the shares of Asian Paints tumbled by as much as 5.1 per cent, hitting an intraday low of Rs 2,235 apiece, before settling 3.4 per cent lower at Rs 2,275.65. In comparison, the BSE Sensex closed 0.4 per cent lower at 78,271.28. Asian Paints was the top loser on the Sensex and Nifty indices.

 

The company’s consolidated net profit attributable to shareholders declined 23.3 per cent year-on-year (Y-o-Y) to Rs 1,110.5 crore in Q3FY25, compared to Rs 1,447.7 crore in the same period last year (Q3FY24).

 

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Revenue also took a hit, falling 6.1 per cent Y-o-Y to Rs 8,549.4 crore, compared to Rs 9,103.1 crore in the same quarter last year. Operating profit (Ebitda) plunged 20.4 per cent Y-o-Y to Rs 1,636.7 crore, as against Rs 2,056.1 crore in Q3FY24. Consequently, Ebitda margin contracted 350 basis points Y-o-Y to 19.1 per cent, from 22.6 per cent a year ago.

 

On the weak performance amid challenging conditions, Amit Syngle, managing director & CEO of Asian Paints, said: “The paint industry continued to be impacted by subdued demand conditions during the quarter, especially in urban centres. We registered a 6.6 per cent decline in the overall coatings business in India, including industrial. The domestic decorative business delivered a 1.6 per cent volume growth, but standalone revenues declined 7.5 per cent, impacted by weak festival season demand.”

 

However, there were positives. The company’s industrial business showed strength, posting a 3.8 per cent Y-o-Y revenue growth, boosted by strong performance in the general industrial and refinish segments. Additionally, Asian Paints saw continued expansion in its home décor business, along with a 5 per cent growth in its international portfolio, which surged 17.1 per cent in constant currency (CC) terms, driven by robust performance in West Asia and recovery in key Asian markets.

 

 The muted results have led analysts to raise concerns about the company’s near-term outlook. 

 

Analysts at ICICI Securities predicted that Asian Paints will face subdued growth in CY25, despite a favourable base in Q4FY25. They expect the stress in urban markets, which has resulted in downtrading, to persist, hurting profitability. Furthermore, the competitive landscape is expected to intensify by H1FY26 as Grasim expands its plants and distribution network, putting pressure on Asian Paints to prioritise market share over margins. 

 

Moreover, rising commodity prices and the depreciation of the rupee add to its challenges, analysts noted. Thus, ICICI Securities has reduced its FY25-26 earnings estimates by 3 per cent, maintaining a ‘reduce’ rating. The brokerage has also revised the target price to Rs 2,200.

 

Meanwhile, Nuvama Research has set a revised target of Rs 3,000 (down from Rs 3,185 earlier) while maintaining a ‘buy’ rating. Nuvama said growth in the international business and the industrial sector are the positives. They lowered their earnings per share (EPS) estimates for FY25-27 due to a weak demand outlook.

 

InCred Equities has a target of Rs 2,340 and maintained a ‘reduce’ rating, citing weak sales. 

 

Among global brokerages, Goldman Sachs has a ‘sell’ rating, lowering its target to Rs 2,275 due to subdued demand and increasing competitive intensity in the market.

 

Morgan Stanley Research maintained an ‘underweight’ rating and lowered the target price to Rs 2,358 per share. Jefferies maintained an ‘underperform’ rating, with a target price of Rs 2,000. CLSA maintained an ‘underperform’ rating and a target price of Rs 2,047. Macquarie Research, however, maintained an ‘outperform’ rating with a target price of Rs 2,650.

 

As the paint industry grapples with subdued demand and rising costs, Asian Paints could have an uphill battle in the near term.