Asian Paints (APNT IN) – Q2FY26 Result Update – Demand sees gradual pickup no immediate sparkles – REDUCE

We raise our FY26/FY27/FY28 EPS estimates by 3.4%/1.4%/4.7% given 1) a healthy demand outlook in 2H, supported by the upcoming wedding season; 2) commissioning of the VAM plant, is expected to aid gross margin expansion from FY28 onwards(~50-75bps); and 3) intensified marketing efforts with a focus on innovation and regional activation strategy to strengthen brand presence & growth in a competitive market. We believe normal monsoon, recent tax reductions, benign inflation, and higher disposable income from the recent GST cut across consumer products will boost consumption trends and sustain demand recovery into 2HFY26. However, we remain cautious on APNT in medium term given 1) sustained competitive intensity, particularly in the decorative paints segment, which is expected to limit margin expansion; 2) a ~4% volume value gap due to deteriorating mix in paints and higher growth in Putty, Construction chemicals and waterproofing , suggesting sales growth to likely remain in the mid-single-digit range; and 3) slower than anticipated scale up in the Bath, Kitchen, and Home Décor businesses amid muted demand and heightened competition. We estimate a CAGR of 5.8% in revenue and 8.4% in EPS over FY26-28. We roll over to Sep27 EPS with 48x multiple and arrived at TP of Rs2448 (2248 earlier, on 46xJun27). APNT trades at 54.3xSepFY27 EPS, which offers little room for upside given competitive context and 20% run up in stock price in the past month. Retain reduce.