Asian Paints sees green shoots in Q1, but growth concerns persist
Consolidated revenue thus dipped 0.3% year-on-year in Q1, marking the sixth straight quarter of decline. The gap between volume and value is likely to persist a little longer. While urban demand is starting to stabilise and a favourable monsoon could support a rural recovery, management doesn't expect a sharp turnaround in the near term and is guiding for single-digit revenue growth despite a soft base. Simply put, stiff competition could prevent a sharp acceleration in demand.
'We believe Q2FY26 volumes could see some benefits of an early Diwali, while Q3 may be affected by the shift in season," said Nomura Research. The broking firm projects flattish year-on-year revenue for FY26 despite an improvement in volumes.
Needed: growth where it counts
The challenge is clear: Asian Paints is seeing growth, but not where it wants. Luxury emulsions underperformed in Q1 while the economy and mid-tier categories drove growth. The home décor segment remained a drag, with bath and kitchen segments declining 5.1% and 2.3%, respectively. Both made losses before tax. Meanwhile, revenue from the industrial segment grew 8.8%, led by automotive and protective coatings.
Margins were a sore spot. While gross margin was flat, Ebitda margin slipped 70 basis points to 18.2%. The company maintained its margin guidance at 18–20% but highlighted that potential anti-dumping duties on titanium dioxide imported from China could reduce gross margin from Q2 onwards, offsetting the benefits of softening crude-linked input costs.
Asian Paints is doubling down on innovation and service differentiation. New product launches contributed 14% of Q1 revenue, and backward integration projects including VAM-VAE and white cement are on track. These should improve cost efficiency and support more differentiated offerings.
Priced for perfection
The stock, which trades at 47 times estimated FY27 earnings, leaves little room for disappointment despite dropping 20% over the past 12 months. It currently trades around ₹2,415, up 4.9% so far this year.
'The entry of deep-pocketed new players with notable investment commitments could drive shifts in market share and cost structures across the industry," said Motilal Oswal Financial Services.
Without clear signs of a sustained recovery in value-led growth, Asian Paints could fail to meet investors' already-subdued expectations. Nomura's analysts summed it up well:'Given the heightened competitive intensity, we still think Asian Paints is not yet out of the woods."
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Standard
10 hours ago
- Business Standard
Kansai Nerolac registers over 4% YoY decline in Q1 PAT; clocks EBIDTA of Rs 311.97 crore
Kansai Nerolac Paints has posted 4.1% fall in consolidated net profit to Rs 215.6 crore in Q1 FY26 from Rs 224.9 crore in Q1 FY25. For the quarter, the company declared net revenue of Rs 2,087.42 crore, a growth of 1.8% over the corresponding quarter of the previous year. EBIDTA fell by 6.7% to Rs 311.97 crore in Q1 FY26 over Q1 FY25. Profit before tax (PBT) in Q1 FY26 was at Rs 310.08 crore, down by 4.1% from Rs 308.1 crore posted in Q1 FY25. Pravin Chaudhari, managing director, Kansai Nerolac Paints, said: During the quarter demand for Decorative showed signs of revival though an early monsoon impacted during the later part of the quarter. KNP decorative performance was affected due to the disturbance in April which impacted key markets in the North. In Automotive, demand for KNP continued to be better than the market, on the back of various initiatives. Performance coatings registered strong growth. Raw material prices were benign. Forex remained volatile. The uncertainty in the environment due to geo-political factors continued and we remain watchful. Looking ahead, we anticipate an improvement in decorative demand driven by a favorable monsoon and the early onset of Diwali. Kansai Nerolac is one of the leading paint companies in India and is the leader in Industrial paints. The company has eight strategically located manufacturing units all over India and a strong dealer network across the country. The company manufactures a diversified range of products ranging from decorative paints coatings for homes, offices, hospitals, and hotels to sophisticated industrial coatings for most of the industries. The scrip shed 0.55% to currently trade at Rs 242.25 on the BSE.
Mint
10 hours ago
- Mint
RBI MPC outcome tomorrow: From rate pause to dovish stance — Here's what Indian stock market investors can expect
RBI MPC meeting August 2025: The Reserve Bank of India (RBI) Monetary Policy Committee meeting, which started on August 4, will conclude on Wednesday, August 6, presented by Governor Sanjay Malhotra. The consensus suggests that the RBI is likely to hold the gunpowder dry for now and is unlikely to announce any rate cuts. Despite fresh trade tensions sparked by US President Donald Trump's move to impose a 25% tariff on Indian goods and looming sanctions over Russian oil imports—India's central bank is expected to stay the course on interest rates, shows a Mint poll of 15 economists. Only four of them anticipate a 25 basis points cut to 5.25% in the upcoming MPC outcome. RBI has implemented a sharp rate-cutting cycle over its past three policy meetings, lowering the benchmark interest rate from 6.5% to 5.5% in total, after maintaining a steady rate for eleven months. 'Complementing this rate-cut cycle, the central bank also delivered a substantial 100-basis-point reduction in the Cash Reserve Ratio during its previous meeting, a move expected to infuse approximately ₹ 2.5 trillion into the banking system by November 2025, significantly enhancing systemic liquidity,' said Sugandha Sachdeva, Founder, SS WealthStreet. Here are the top 4 expectations of the Indian stock market from the upcoming RBI MPC meeting - The upcoming August monetary policy meeting is set against the backdrop of a significant decline in headline inflation in recent months, mainly due to falling food prices. Inflation is expected to remain below the 4% target on average over the next two quarters, aided by a favourable base effect and subdued food inflation. 'The MPC is widely expected to hold the policy rate steady at 5.5% in the upcoming meeting, allowing the economy more time to absorb the transmission of earlier rate cuts. A pause at this juncture would be consistent with the RBI's forward-looking approach, especially as previous liquidity injections and rate reductions are still working their way through the system,' Sachdeva said. She further added, ' While a further 25bsp rate cut cannot be entirely ruled out, it appears unlikely in the immediate term, given the front-loaded nature of recent policy action. That said, with inflation well within the RBI's comfort zone and external risks still unfolding, the probability of additional easing in the next policy review remains firmly on the table.' However, Anuj Gupta, Director, Ya Wealth Research & Advisory, also believes a 25 bps rate cut is likely. 'This is likely to happen because of the focus on the upcoming festival season. The past data show a clear trend that any repo rate cut ahead of Diwali results in higher credit growth during the festive period. This step will provide liquidity to the markets, and the market may take support from it,' said Gupta. According to the CareEdge Ratings report on RBI Policy, the CPI inflation eased further to 2.1% in June, coming below expectations and marking the lowest print since January 2019. 'Overall inflationary environment is likely to remain favourable over the next few quarters. However, inflation is likely to inch up above the 4% mark in the fourth quarter of this fiscal year as the favourable base effect wanes. CPI inflation is likely to undershoot the RBI's FY26 projection of 3.7%. Accordingly, the RBI may revise its inflation forecast downward. We expect CPI inflation to average around 3.1% in FY26. Given the low base of FY26, we expect average CPI inflation to be higher, around 4.5% in FY27,' the report said. Sugandha Sachdeva of SS WealthStreet highlighted that these accommodative policy measures have been strategically aimed at reviving economic momentum, improving credit flow, and stimulating aggregate demand in the face of slowing global growth and trade tariff-related challenges. 'However, the outlook is not without risks. Ongoing trade tensions and escalating tariffs imposed by the United States pose potential downside risks to India's external sector and overall growth trajectory. These global headwinds could prompt the central bank to retain a dovish tone,' she said. The RBI's liquidity injection has kept the overall banking system liquidity in surplus. The announced phased 100 bps CRR cut beginning September is expected to inject about ₹ 2.5 trillion of durable liquidity into the system by December, according to the CareEdge report. Additionally, RBI's record ₹ 2.7 trillion dividend transfer to the Government adds to the durable liquidity, which should flow into the system as government spending remains healthy, the report added. Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Mint
12 hours ago
- Mint
Indian stock market: Can Sensex, Nifty bounce back if RBI pulls a surprise rate cut for 2nd time in a row?
Indian stock market: Reserve Bank of India (RBI) governor Sanjay Malhotra has demonstrated a penchant for surprising financial markets, especially through bold rate and liquidity actions that deviated from conventional timing and scale expectations. In February 2025, he delivered a 25 bp repo rate cut to 6.25%, marking the first rate cut in nearly five years. This move was widely expected by markets, yet still notable as a turnaround in policy stance. More significantly, in June 2025, the RBI announced an unexpected 50 bp rate cut (to 5.50%) — double what most analysts had forecast — alongside a 100 bp CRR cut, releasing substantial liquidity into the banking system. Now, the question remains if the third time would be a charm? While the consensus remains that Governor Malhotra and team are unlikely to announce any rate cut in the upcoming MPC outcome, slated for tomorrow, August 7, certain factions of the market are unable to rule out the possibility. State Bank of India, for instance, expects RBI to announce a 25 basis points (bps) repo rate cut in the upcoming MPC outcome. The report said a frontloaded rate cut in August could bring an "early Diwali" by boosting credit growth, especially as the festive season in FY26 is also frontloaded, as per ANI. It added that past data show a clear trend, any repo rate cut ahead of Diwali results in higher credit growth during the festive period. Meanwhile, Harshal Dasani, Business Head, INVasset PMS, also expects the RBI to pull the trigger and likely announce another 25 bps rate cut as it could look to protect the Indian economy from the impact of fresh tariffs unleashed by US President Donald Trump, and as inflation remains in its comfort band. While Nuvama Institutional Equities expects a status quo this time, it doesn't rule out the possibility of more rate cuts down the line. After front-loading a 50bp-rate cut and shifting to a 'neutral' stance at the last policy, we see MPC holding rates steady at 5.5%, the brokerage said. "Yet, we think the case for more cuts is compelling. Economy is losing momentum (seen in credit growth, PV sales, RE sales, profits, exports, capex) while inflation remains benign. With the fiscal policy on a consolidation path, the RBI must do the heavy lifting to revive demand," it added. Despite the RBI's rate cut and banks lowering deposit rates, deposit growth continues to outpace credit offtake, according to a CareEdge report. As of June 13, 2025, deposits declined 0.44% sequentially to ₹ 230.7 lakh crore, reflecting slower growth compared to 12.1% (ex-merger) last year. Credit offtake stood at ₹ 183.1 lakh crore, growing 9.6% YoY — significantly lower than the 15.5% seen last year — due to a high base effect and muted demand across segments, including retail. Other indicators, like auto sales, are also pointing to slowing economic momentum. Domestic passenger vehicle industry volumes decreased by 1.4% yoy in Q1 FY26. Two-wheeler industry volumes also decreased by 8% YoY during this period, owing to the weak performance of the motorcycle and scooter segments on a higher base. Now, with the tariffs unleashed by Trump, along with the promise of more penalties, the Indian economy faces a fresh round of headwinds. In such a scenario, analysts believe that even if the RBI pulls the rate cut trigger, it is unlikely to result in sustained strength in the stock market. The answer to the revival of the market bulls lies in the resolution of the trade deal, believe analysts. Sensex and Nifty have been rangebound for over a month, as multiple headwinds like FII flows, tariff hike and tepid earnings growth are keeping momentum in check. According to Dasani, if the RBI delivers a surprise 25 bps rate cut in its August 5 policy, equity markets may initially react with cautious optimism — but the deeper message will depend on how the move is framed. "If the rate cut is positioned as a proactive measure to support liquidity, lending, and growth amid global headwinds, markets may see it as a positive signal that domestic inflation is under control and that the central bank is confident about macro stability. However, if the cut is perceived as a response to downside risks to growth or external stress, markets may fear the RBI knows something they don't — triggering a defensive rotation into FMCG or IT," Dasani added. Crucially, the context matters! India's CPI at 4.8%, easing core inflation, strong GST collections ( ₹ 1.72 lakh crore in July), and robust GDP expectations (~7% for Q1FY26) provide enough cover for the RBI to act without looking desperate, he said. Similarly, Vinit Bolinjkar, Head of Research at Ventura Securities, said that the current events weighing on the Indian market do warrant a rate cut, but I am sceptical of the RBI acting on it right now because the rupee has depreciated quite a bit. He believes that even if the RBI were to cut rate, market could see a pop but would resume its downtrend given the fact that there are unlikely to be more rate cuts ahead. "Until and unless we have the resolution of the tariff deal, it's difficult for the market to get into the next leg of the up move. I rather think the tariff war could escalate, which could send the market into a tailspin for at least one to two quarters," opined Bolinjkar. Vaibhav Vidwani, Research Analyst at Bonanza, also expects the market reaction to be mixed; though the interpretation would depend heavily on the underlying economic context, she said. Analysts believe sectors like banks, autos, and rate-sensitive housing stocks could rally in the short term on expectations of improved credit transmission and demand pickup. Lastly, Ajit Mishra of Religare Broking expects a negative impact on the market from the latest rate cut move. He said it could act as a negative trigger, in case it happens, because it could signal that something is wrong with the economy. Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
