Asian Paints Ltd’s domestic decorative volume growth of 3.9% in the June quarter (Q1FY26) is encouraging, though not exciting. The growth comes amid dull demand, made partly worse by an early monsoon and continued downtrading from premium to economy emulsions.
Consolidated revenue thus dipped 0.3% year-on-year in Q1, marking the sixth straight quarter of decline. The gap between volume and value is likely to persist a little longer. While urban demand is starting to stabilise and a favourable monsoon could support a rural recovery, management doesn’t expect a sharp turnaround in the near term and is guiding for single-digit revenue growth despite a soft base. Simply put, stiff competition could prevent a sharp acceleration in demand.
“We believe Q2FY26 volumes could see some benefits of an early Diwali, while Q3 may be affected by the shift in season,” said Nomura Research. The broking firm projects flattish year-on-year revenue for FY26 despite an improvement in volumes.
Needed: growth where it counts
The challenge is clear: Asian Paints is seeing growth, but not where it wants. Luxury emulsions underperformed in Q1 while the economy and mid-tier categories drove growth. The home décor segment remained a drag, with bath and kitchen segments declining 5.1% and 2.3%, respectively. Both made losses before tax. Meanwhile, revenue from the industrial segment grew 8.8%, led by automotive and protective coatings.
Margins were a sore spot. While gross margin was flat, Ebitda margin slipped 70 basis points to 18.2%. The company maintained its margin guidance at 18–20% but highlighted that potential anti-dumping duties on titanium dioxide imported from China could reduce gross margin from Q2 onwards, offsetting the benefits of softening crude-linked input costs.
Asian Paints is doubling down on innovation and service differentiation. New product launches contributed 14% of Q1 revenue, and backward integration projects including VAM-VAE and white cement are on track. These should improve cost efficiency and support more differentiated offerings.
Priced for perfection
The stock, which trades at 47 times estimated FY27 earnings, leaves little room for disappointment despite dropping 20% over the past 12 months. It currently trades around ₹2,415, up 4.9% so far this year.
“The entry of deep-pocketed new players with notable investment commitments could drive shifts in market share and cost structures across the industry,” said Motilal Oswal Financial Services.
Without clear signs of a sustained recovery in value-led growth, Asian Paints could fail to meet investors’ already-subdued expectations. Nomura’s analysts summed it up well:“Given the heightened competitive intensity, we still think Asian Paints is not yet out of the woods.”
