Asian Paints Ltd.'s September-quarter earnings missed analyst estimates, prompting three brokerages to cut their target prices despite expectations of a recovery in the second half.
EBITDA rose just 3.6% year on year, significantly slower than revenue growth of 16.9%, as higher input costs squeezed margins. HSBC, Jefferies and Goldman Sachs lowered their target prices, while Macquarie retained Outperform. Analysts flagged rising commodity costs, competitive pressure and the risk of consumer downtrading as challenges to the recovery.
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Asian Paints Q2 Highlights (YoY)
- Revenue rose 16.94% year on year to Rs 9,977 crore from Rs 8,531 crore.
- EBITDA increased 3.6% year on year to Rs 1,557 crore from Rs 1,503 crore.
- Net profit rose 7.4% year on year to Rs 1,068 crore from Rs 994 crore.
- EBITDA margin declined to 15.6% from 17.6% a year earlier.
- Overall volume growth stood at 6.8%.
- India decorative business volume growth was 6.4%, while domestic coatings value growth stood at 16.4%.
- International business net sales increased 29.5%.
- Bath fittings revenue rose 18.5%, while kitchen revenue increased 13%.
- White Teak net sales declined 11.8%.
Here's what brokerages are saying after Asian Paints announced Q2 results:
HSBC
- Maintained 'Hold'; Target Price Cut To Rs 2,420 From Rs 2,650
- Retained FY27 EBITDA margin guidance of 18–20%.
- Said rising input costs and competition threatened margin recovery.
- Highlighted premiumisation and festive demand as potential support.
- Flagged dealer promotions and consumer downtrading as risks.
- Cut its target valuation multiple to 40 times from 45 times.
Jefferies
- Maintained 'Buy'; Target Price Cut To Rs 3,025 From Rs 3,350
- Expects 8–9% decorative volume growth in H2, supported by festive and wedding demand.
- Retained FY27 EBITDA margin guidance of 18–20%.
- Expects additional price hikes to help offset inflation.
- Said VAM/VAE backward integration could deliver a three-to-five-percentage-point benefit at full potential.
Goldman Sachs
- Maintained 'Sell'; Target Price Cut To Rs 2,375 From Rs 2,725
- Said revenue rose 16.9% year on year, while EBITDA increased just 3.6%, missing estimates by 11.6%.
- Noted that decorative volume growth slowed to 6.4% from 9% in Q1.
- Estimated gross margin contracted 350 basis points year on year.
- Said management retained FY27 EBITDA margin guidance of 18–20%.
- Cut FY27–FY29 earnings per share estimates by around 2%.
Macquarie
- Maintained 'Outperform'; Target Price At Rs 3,300
- Said revenue grew 16.9% year on year, while EBITDA rose just 3.6% and missed estimates.
- Highlighted decorative volume growth of 6.4%.
- Estimated gross margin contracted around 400 basis points year on year.
- Noted that management retained its 18–20% EBITDA margin guidance.
- Expects pricing and backward integration to support margin recovery.
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