Asian Paints Ltd. delivered a stronger-than-expected June-quarter performance, prompting brokerages to raise target prices as robust decorative paints demand and higher operating margins helped the company comfortably beat Street estimates.
The performance was driven by both higher volumes and value growth in its core decorative paints business. Domestic decorative paints posted 9% volume growth and 16.6% value growth, while the industrial coatings business sustained mid-teen growth. International business also remained a bright spot, with net sales rising 27.2% year-on-year.
Asian Paints Q1 (Cons, YoY)
- Other Income At Rs 241 crore Vs Rs 193 crore
- Tax Expense At Rs 536 crore Vs Rs 392 crore
- Profit [GU] 39.9% At Rs 1,539 crore Vs Rs 1,100 crore
- Revenue [GU] 17.9% At Rs 10,542 crore Vs Rs 8,939 crore
- EBITDA [GU] 33.4% At Rs 2,169 crore Vs Rs 1,626 crore
- EBITDA Margin At 20.6% Vs 18.2%
Following the results, Jefferies reiterated its 'Buy' rating and raised its target price to Rs 3,350 from Rs 3,300, calling it "A Colourful Quarter." The brokerage said Asian Paints delivered a strong performance on almost every front, with revenue growth reaching a multi-year high and margins surprising positively.
Jefferies noted that management retained its guidance for 8-10% volume growth and stable margins despite inflationary risks. It also highlighted that the ramp-up of value-added products and services could provide a medium-term margin lever, keeping its outlook constructive despite intensifying competition in the paints industry.
Goldman Sachs, however, maintained its 'Sell' rating even as it raised its target price to Rs 2,725 from Rs 2,575. The brokerage acknowledged that the June-quarter performance was ahead of expectations, largely because of stronger-than-expected margins.
While Goldman expects margins to moderate as the benefit of low-cost inventory fades, it believes operating margins are likely to remain within the 18-20% range. It also expects management's 8-10% volume growth guidance for FY27 to remain achievable.
Beyond paints, performance across the home décor portfolio was mixed. The kitchen business grew 10.1%, while Weatherseal revenue increased 11.2%. However, the bath fittings business saw sales decline 4.3%, and White Teak revenue fell 7.4%.
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