Consolidated net sales grew 3.9% year-on-year to Rs 8,850 crore in the December quarter, compared to Rs 8,521 crore in the corresponding period last year.Earnings before depreciation, interest, taxes, other income and exceptional items (PBDIT) rose 8.8% to Rs 1,781 crore from Rs 1,637 crore a year earlier, while PBDIT margin increased to 20.1% from 19.2%.
What should investors do?
Citi has reiterated its sell rating on Asian Paints while marginally raising its price target to Rs 2,250 from Rs 2,300, implying a downside of 12.5% from current levels.
Although revenue and EBITDA rose 4% and 9% year-over-year respectively – helped by a favorable base – both figures fell short of Citi’s estimates. Decorative volumes grew 7.9% year-on-year, largely on a fundamental basis, with the brokerage noting that underlying demand prospects remain weak.
While management has targeted volume growth of 8-10%, value growth is expected to remain subdued due to an unfavorable product mix. Citi has therefore cut its FY26-28 revenue estimates by around 3%, while EPS estimates remain largely unchanged.
The modest revision to the target price reflects a rollover to a valuation of 45x price-to-earnings by December 2027, even as Citi maintains its generally cautious stance on the stock.
Morgan Stanley maintained its Underweight rating on Asian Paints with a price target of Rs 2,194. The brokerage noted that growth exceeded consensus expectations and was weaker than in the second quarter, with the third quarter impacted by a shorter festive season and a longer monsoon. Although rural demand outperformed urban markets, overall momentum remained weak.
For the fourth quarter, the company has forecast volume growth of 8 to 10%, but a negative mix of 4 to 5% implies value growth of only 5 to 6%. This translates into FY26 implied revenue growth of around 4%, below the consensus of around 5%. Morgan Stanley continues to signal high competitive intensity and declining repaint frequency, although EBITDA margins of 18-20% are maintained despite continued brand investments.
On the contrary, Nomura has a buy-in for Asian Paints as it has revised its target price to Rs 3,250 from Rs 3,275. The stock currently trades at around 47x Mar-28F earnings per share. FY27F and FY28F earnings per share estimates have been reduced by 2.4% and 0.2%, respectively, due to management guidance. The valuation remains unchanged at 60x price/earnings, in line with the company’s 10-year trading average and the midpoint of its historical valuation range of 50-80x, applied to December 27 earnings per share.
The brokerage has remained constructive, believing that peak competitive pressures are behind us, with limited disruption despite significant investment by new entrants, underscoring Asian Paints’ strong competitive position. It forecasts an EPS CAGR of 10% over fiscal 26-28F and expects earnings growth to return to the low-to-mid teens over the medium term as the economy and competitive landscape normalize. The main risk remains higher than expected competitive intensity.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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