PL Capital Coverage: Asian Paints’ Q2 Rebound Lifts Earnings, but Competition Keeps Outlook Cautious

Mumbai | November 14 – Asian Paints reported a strong second-quarter performance for FY26, with consolidated net profit rising 43% YoY to ₹993.6 crore, supported by improved demand across markets and stable raw material costs. Revenue from sales grew 6.4% YoY to ₹8,513.7 crore. The sharp earnings recovery also helped the stock climb to a new 52-week high of ₹2,897 during Thursday’s trade.

Domestic decorative volumes expanded 10.9% YoY, marking a return to double-digit growth after four subdued quarters. “We saw an improvement in our domestic decorative business, with growth generated across both urban and rural markets through stronger marketing and micro-regional activations,” said Amit Syngle, MD & CEO, Asian Paints. The festive-led recovery, early-season demand and premiumisation aided value growth of 6%.

According to Amnish Agarwal, Head of Research at PL Capital, the rebound demonstrates Asian Paints’ strong distribution and brand equity advantage, but the overall backdrop remains uneven. “Volume traction has improved, but it is too early to call an industry-wide revival. Competitive intensity remains high and could limit pricing power as we move into the second half,” he said.

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Margins Improve as Input Costs Stabilise; Global & Industrial Segments Support Growth

Operating performance remained strong, with gross margins expanding 242 bps to 43.2% and EBITDA margins rising 220 bps to 17.6%, aided by benign raw material trends and better sourcing efficiencies. Management reiterated its FY26 EBITDA margin guidance of 18–20%.

The international business posted 9.9% YoY revenue growth to ₹846 crore, or 10.6% on a constant-currency basis, led by Nepal, Sri Lanka, the UAE and Africa. Profitability improved significantly following the exit from loss-making Indonesia.

Industrial coatings delivered a steady performance as well, with:

• Asian Paints PPG revenue up 10.2% YoY to ₹292.6 crore
• PPG Asian Paints revenue up 13.3% YoY to ₹594.3 crore

The home décor business remained weak, with declines across most categories except Weatherseal, which recorded 56.9% YoY growth.

Syngle noted that early festive demand lifted Q2 momentum, though “the home décor business continues to navigate headwinds despite encouraging traction in Beautiful Homes stores.”

Asian Paints also declared an interim dividend of ₹4.5 per share, with November 18 as the record date.

Outlook

Shares of Asian Paints have rallied more than 20% over the past month and now trade near 59× FY26 earnings, a level that remains expensive relative to sector growth trends.

According to Amnish Agarwal, input cost stability and margin resilience are clear positives, but elevated valuations and persistent competition warrant caution. “While Asian Paints delivered a solid Q2 print, industry demand is still not broad-based, and pricing aggression from peers could re-emerge,” he added.

As a result, we maintained a REDUCE rating on the stock, with a target price of ₹2,448, factoring in its Sep’27 estimates. “The company continues to execute well, but sustaining premium multiples will require consistent volume-led growth and stable margins over the coming quarters,” Agarwal concluded.

Read PL Capital’s  Asian Paints Q2 FY26 report here