Asian Paints sees early signs of demand recovery despite flat Q1 numbers

Asian Paints reported a flat topline in the first quarter of FY26, with consolidated revenue dipping marginally by 0.3% year-on-year to ₹89,386 crore. EBITDA also fell by 4.1% to ₹16,250 crore, in line with analyst expectations, while net profit declined 6% to ₹10,998 crore.

Despite muted earnings, the company is optimistic about the months ahead. The company has started witnessing green shoots in demand and expects this trend to continue. It believes demand has bottomed and should recover hereon. APNT does not expect a further deterioration in demand conditions.

"We believe APNT’s Q2FY26 prospects shall be better owing to urban demand recovery, deflation in crude prices and large retailing season in September due to early Diwali," said Abneesh Roy, executive director, Nuvama Institutional Equities.

In the domestic market, Asian Paints’ decorative business posted 3.9% volume growth, but revenue dipped 1.2% year-on-year. This divergence was driven by continued downtrading, higher rebates, and early monsoons dampening demand. However, Roy pointed out that the volume-value gap narrowed to 5.1% in Q1FY26 from 7% in the previous quarter, an encouraging trend that management aims to maintain.

The performance was mixed across geographies. The North East and North West saw healthy demand, while southern India remained sluggish, something the company expects to be temporary. Meanwhile, international business posted 17.5% constant currency growth, with strong contributions from the UAE, Egypt, and parts of Asia. However, the Africa segment fell 7% year-on-year, impacted by local currency depreciation.

Industrial coatings delivered an 8.8% revenue jump, supported by double-digit growth in automotive coatings (up 11.1% YoY). That said, "despite strong top- line growth in Industrial, operating profitability got hurt owing to competitive pressures leading to price cuts and higher marketing investments," said Roy.

The company’s home décor and furnishings business continued to struggle, with White Teak’s revenue plunging 32% and kitchen and bath fittings posting mid-single-digit declines.

Roy highlighted that “the company’s industrial and B2B verticals could become key growth drivers as capex activity picks up.” Asian Paints has guided a capital expenditure of ₹700 crore for FY26, with its white cement plant nearing commissioning and the VAM-VAE project slated for launch by FY27.

One concern on the horizon is the imposition of anti-dumping duty on TiO₂, a key raw material, which could raise input costs by 1.5–2%. While crude price deflation is offering some cushion, this cost pressure will likely weigh on Q2 margins.

Looking ahead, management has maintained a guidance of 18–20% EBITDA margin for FY26 and expects single-digit growth in both volume and value terms. With festive season stocking expected in September and lower base effects, the second quarter could offer a better glimpse into the recovery trajectory.

Nuvama has retained a ‘Buy’ rating on the stock, with a revised target price of ₹2,935.