Asian Paints’ consolidated revenue grew 6.3% YoY to Rs 85.3 billion. Thermax reported revenue/Ebitda/APAT of Rs 24.7/1.7/1.2 billion, a beat/miss by -4/-21.7/-16.9%. The Ebitda margin of 7% was weaker than our estimate of 8.5%, largely due to lower margins in projects, attributable to cost overruns (Rs 420 million).
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HDFC Securities Institutional Equities
Asian Paints - Strong performance; beats expectations on all fronts
Asian Paints Ltd.’s consolidated revenue grew 6.3% YoY to Rs 85.3 billion (our estimate: Rs 80.5 billion). Decorative clocked 10.9/6% volume/value growth, driven by intensified brand-building, step-up in product regionalization, widening B2B net, and early festive demand.
Extended monsoon did partially impact sales momentum though. Industrial segment positively surprised too (up 12.4% YoY; 160bps PBTM expansion in Q2).
International business grew 9.9% YoY. Gross margin expanded 242bps YoY to 43.2% (our estimate: 41.4%), supported by ~1.6% material cost deflation and sourcing/formulation efficiencies. Consequently, Ebitdam expanded 218bps YoY to 17.6% (our estimate: 15.9%), despite aggressive marketing spends.
Management maintained mid-single-digit value growth and 18-20% margin guidance for FY26. We have revised our FY27/28 EPS estimates by 4-6% to account for receding competitive intensity (at the margin) in FY27/28 and maintain Add with a DCF-based target price of Rs 2,750/share; implying 48x Sep-27 P/E.
Ashok Leyland - Margin expansion continues to impress
We expect that the company’s margin expansion will continue, led by of higher growth of the non-CV segments, continuing cost mitigation efforts, and the launch of higher horsepower (HP) vehicles in the higher-margin tipper segment.
However, we remain concerned about the higher pledging by the promoter group and will closely watch out for any developments on the same. Considering that Ashok Leyland has resumed active participation in e-Bus tenders again, and with SWITCH India already reaching profitability at the PAT level, we expect value unlocking to occur sooner as its market value gets established.
Given the lack of data and financials, we have factored the benefit into the company’s valuation multiple, valuing the company’s core business at 19x Sep-27 EPS (vs 18x earlier).
Also, we include the value of Hinduja Leyland Finance (Rs 24) to arrive at a target price of Rs 178. We maintain a Buy rating.
Thermax - Weak financial performance
Thermax Ltd. reported revenue/Ebitda/APAT of Rs 24.7/1.7/1.2 billion, a beat/miss by -4/-21.7/-16.9%. The Ebitda margin of 7% was weaker than our estimate of 8.5%, largely due to lower margins in projects, attributable to cost overruns (Rs 420 million).
Order inflow in Q2 FY26 witnessed 6% uptick YoY at Rs 35.5 billion, taking the order book as of Sep’25 to Rs 123 billion (+6%YoY). Thermax expects industrial products to continue steady growth and green solutions to record healthy order inflows.
Large orders from cement, steel, power, refinery, and petrochemical should start getting awarded from H2 FY26. New growth drivers are emerging in the form of medium MW power projects, international power projects, rampup of the chemical business, and increased traction in products launched over the past few years.
Profitability is likely to improve with changes in mix toward profitable industrial products and chemical segment and completion of lowermargin order backlog.
Ramping up of new product portfolio, impetus on cleaner air and water and focus on bio-CNG will be add-ons. We have cut estimates, given weak projects profitability. We maintain Buy on Thermax, with a reduced target price of Rs 4,125 (45x Sep-27E EPS).
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