Shares of Asian Paints fell as much as 6.55% during early trade on Wednesday, closing at ₹2,623. This sharp decline followed the company's third-quarter earnings report for the period ending December 31, 2025. While analysts noted a recovery in volumes and a multi-quarter high in margins, the company's weak revenue growth and a cautious demand outlook left investors jittery. Over the last year, the stock has appreciated by approximately 11%, in line with the benchmark Nifty 50's return during the same period.

Revenue expansion below street estimates

Asian Paints reported consolidated net sales of ₹8,850 crore, marking a 3.9% year-on-year (YoY) increase, which fell short of market expectations. The domestic decorative business saw volume growth of 7.9%—a deceleration from the 10.9% recorded in the previous quarter—impacted by a shorter festive season and prolonged monsoons. Analysts from ACMIIL noted a persistent volume-value gap of 5.1% for the decorative segment, indicating that revenue continues to lag behind volume gains due to a negative product mix and increased discounting.

Brokerage reactions and outlook

Centrum Broking downgraded the stock to NEUTRAL, citing concerns over tapering volume expectations and shifting consumer behaviour, such as destination weddings reducing local painting demand. They also noted a shift in discretionary spending towards travel and tourism. Conversely, Systematix maintained its BUY rating, noting that while risks persist, sturdy volume growth indicates "green shoots" for the industry.

Margins hit multi-quarter highs

A standout highlight was the gross margin, which expanded by 200 basis points (bps) YoY to 44.4%—its highest level in 19 quarters. This expansion was fuelled by a 1.1% deflation in the raw material basket and internal sourcing efficiencies. Consequently, the consolidated EBITDA margin improved to 20.1%, crossing the upper range of the management's guidance band.

Exceptional items impact bottom line

The bottom line was weighed down by exceptional items totalling ₹157.61 crore, including a ₹93.87 crore impairment related to the "White Teak" acquisition and charges from new labour codes. Management has set guidance of 8-10% volume growth in the near term, though value growth is expected to remain in the mid-single digits at 4-5% due to a structural shift toward economy-grade products.