Asian Paints faces near-term headwinds as weak Q3 dampens sentiment

ET Intelligence Group: Asian Paints has misplaced 10% on bourses since January 27 after a lacklustre December-quarter efficiency rekindled worries over softening demand. The rebound in sentiment seen after the September-quarter, pushed by hopes of GST-led worth aid and festive-season traction has light with an prolonged monsoon, a shorter festive interval and intensifying competitors weighing on the near-term outlook. Although the paint main expects aggressive strain to stay intense within the quick time period, it has retained the FY26 steerage of 8-10% quantity development and 18-20% working margin earlier than depreciation and amortisation (Ebitda margin), supported by formulation and sourcing efficiencies. It additionally expects to achieve market share over the subsequent 12-18 months pushed by waterproofing and residential decor segments.

Ornamental volumes grew at a slower tempo of 8% within the December-quarter in contrast with 11% development within the earlier quarter, indicating lack of traction within the repainting exercise. The worldwide enterprise income elevated 6.3% attributable to regular efficiency in key markets. With loss-making Indonesia enterprise now out of the portfolio and decrease uncooked materials prices, the corporate expects regular however measured progress from offshore models.

A shift by customers in discretionary spending in the direction of journey and hospitality has resulted in lesser frequency of repainting. Nevertheless, the rise in luxurious and premium housing continues to indicate higher development on the larger finish of the market, boosting demand for waterproofing options and building chemical substances.

Regardless of mushy demand, Ebitda margin expanded by 90 foundation factors year-on-year to twenty.1%, led by decrease raw-material prices. Amid a cautious demand outlook, the corporate expects 5% worth development for FY26, which lags its close to double-digit quantity development estimates. That means a subdued pricing development.

The house decor phase confirmed early indicators of stabilisation with narrowing losses within the kitchen fittings phase and the tub phase inching in the direction of breakeven. The ornamental retail division remained beneath strain, however industrial (B2B) and initiatives companies continued to outpace the remainder of the portfolio, pushed by orders from factories and authorities shoppers.

Since development has not picked up as anticipated, the brokerages have trimmed earnings estimates for the corporate by 1-3% for FY26-28 and minimize goal worth by upto 10%. Whereas margins stay sturdy, the slower-than-anticipated development within the core ornamental enterprise has lowered expectations for the remainder of the monetary yr. Asian Paints continues to depend on price financial savings, new product launches and regular efficiency in some non-paint classes to help profitability as demand restoration stays gradual.