Paint Stocks Get A Fresh Coat Of Optimism With Investec's Upgrades — Should You Buy?

After nearly three years of aggressive competition and relentless pricing pressure in India's paints industry, Investec believes the sector may finally be moving past its most disruptive phase. The brokerage upgraded Indigo Paints and Kansai Nerolac to “Buy” from “Hold”, while also raising Asian Paints and Berger Paints to “Hold” from “Sell”, arguing that competitive intensity is beginning to ease and margin recovery could follow.

Investec raised its target price on Indigo Paints to Rs 1,230 from Rs 1,110 and on Kansai Nerolac to Rs 250 from Rs 240. Asian Paints' target price was hiked sharply to Rs 2,750 from Rs 2,285, while Berger Paints' target moved up to Rs 525 from Rs 460.

The brokerage said Birla Opus, the new entrant backed by the Aditya Birla Group, appears to be pivoting away from an all-out market share chase toward a greater focus on reducing losses. According to Investec, Birla Opus had absorbed a significant portion of incremental industry growth over the past two years, while also exerting broad pricing pressure on incumbents through aggressive expansion and trade schemes.

However, the brokerage now expects the incremental market share drag on existing players to moderate to around 1.5-2% over the next two years, compared with roughly 3-4% in the recent past. Birla Opus is estimated to close FY26 with market share of around 6.5-7%, up from about 0.8% in FY24, suggesting the sharpest phase of disruption may already be behind the industry.

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Margin Recovery Back on the Table

Investec also believes the sector could see improving profitability as companies begin passing on higher raw material costs and competitive discounting eases. The brokerage pointed to recent price hikes announced by paint companies following increases in crude-linked raw material costs, particularly after the spike in global energy prices.

It also noted that Birla Opus itself has started rolling back some dealer incentive schemes and promotional offers, indicating a more measured approach to expansion. That shift, according to Investec, could help restore pricing discipline across the industry and reduce pressure on advertising and promotional spending, both of which had surged during the recent competitive battle.

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Among the sector picks, Investec said Indigo Paints and Kansai Nerolac offer the most attractive risk-reward profiles.

The brokerage expects Kansai Nerolac to benefit from a recovery in industrial and automotive coatings demand, while also gaining from premiumisation trends in decorative paints. For Indigo Paints, Investec sees scope for faster growth compared with larger peers, supported by a relatively smaller base, improving scale and stronger return ratios over time.

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