Asian Paints Regains Momentum with Strong Q2 Performance
Asian Paints Ltd. has delivered a remarkable performance in the September quarter (Q2FY26), breaking a streak of four quarters of subdued growth and sending its shares to a fresh 52-week high. The company's consolidated revenue climbed 6.3% year-on-year to ₹8,531 crore, powered by a robust rebound in its core decorative paints business. This resurgence highlights the company's execution strength and brand power in a competitive market.
Quarterly Breakdown: Volume, Value, and Margins
The standout figure for the quarter was the decorative paints volume growth, which surged to 10.9% year-on-year. This double-digit expansion marks a significant recovery. The value growth for the decorative segment was a healthy 6%, surpassing analyst forecasts. This performance was bolstered by an early festive season, a comparatively low base from the previous year, and enhanced operational execution.
Profitability saw a substantial improvement. The company's gross margin expanded by 242 basis points to 43.2%, benefiting from softer input costs and strategic sourcing efficiencies. Consequently, the Ebitda (earnings before interest, taxes, depreciation, and amortization) margin jumped 220 basis points to 17.6%, comfortably exceeding estimates. Asian Paints has reaffirmed its Ebitda margin guidance of 18-20% for the full fiscal year FY26.
Outpacing Competition and Market Dynamics
Asian Paints' performance stood in contrast to its close competitor, Berger Paints India, which reported decorative paint volume growth of 8.8% but a much lower value growth of just 1.1%. Analysts attribute Asian Paints' superior showing to its unwavering focus on premiumization, while some rivals resorted to pushing higher grammage. Furthermore, the company's significant investment in micro-regional advertising campaigns and its unparalleled distribution network played a crucial role in capturing the improved demand witnessed in September and early October.
The company's other business segments also contributed positively. The industrial and automotive coatings business saw 12% year-on-year revenue growth. The international portfolio grew 9.9% in rupee terms, driven by strong performances in Nepal, Sri Lanka, and the UAE, with its profit before tax margin improving sharply after exiting the loss-making Indonesian market.
Cautious Optimism Amidst Rich Valuations
The stellar results prompted several brokerages to upgrade their earnings estimates for Asian Paints for FY26 and FY27. Investor sentiment was also buoyed by news of the CEO exit at the new competitor, Birla Opus, potentially signaling a reduction in competitive aggression. ICICI Securities noted this could allow Asian Paints to report stronger revenue growth in the second half of the fiscal year.
However, analysts from Incred Research Services caution that it is too early to declare an industry-wide demand recovery, given the weak first half for all players. The stock, having rallied over 20% in the past month, now trades at a rich valuation of approximately 59 times its FY26 earnings. While Asian Paints has demonstrated its resilience, sustaining this momentum will require consistent volume-led growth and strong margins in the face of ongoing competitive pressures and potential geopolitical risks to input costs.
