Asian Paints Faces Near-Term Headwinds as Weak Q3 Dampens Sentiment

Why It Matters

The slowdown highlights the fragility of the decorative paint recovery, affecting revenue outlooks and investor confidence across the Indian consumer‑goods sector. Asian Paints' ability to sustain margins while navigating demand weakness will influence competitive dynamics and supply‑chain pricing.

Key Takeaways

• Q3 decorative volumes grew 8%, down from 11% prior quarter
• EBITDA margin rose to 20.1% despite weak demand
• FY‑26 guidance holds 8‑10% volume growth, 18‑20% EBITDA margin
• Market‑share focus shifts to waterproofing, home‑decor segments
• Brokers cut earnings estimates 1‑3% and target price up to 10%

Pulse Analysis

Asian Paints, India’s paint industry bellwether, is confronting a nuanced demand environment as the December quarter revealed a deceleration in decorative volume growth. Seasonal factors such as an extended monsoon and a shortened festive period have curtailed repainting activity, while consumers divert discretionary spending toward travel and hospitality. At the same time, intensified competition from both domestic and international players pressures pricing, prompting the company to lean heavily on cost‑saving initiatives and product innovation to preserve profitability.

Financially, the firm managed to improve its EBITDA margin by 90 basis points year‑on‑year, reaching 20.1%, primarily due to lower raw‑material costs and operational efficiencies. The home‑decor segment shows early signs of stabilization, with kitchen‑fittings narrowing losses and the bath segment approaching breakeven. International revenue grew modestly, bolstered by steady performance in key markets, even as the loss‑making Indonesia operation exits the portfolio. These dynamics enable Asian Paints to uphold its FY‑26 outlook of 8‑10% volume growth and an 18‑20% EBITDA margin, underscoring the resilience of its core business model.

Looking ahead, the company is betting on market‑share expansion in high‑margin waterproofing and premium home‑decor categories, leveraging rising luxury housing projects. However, brokerages have trimmed earnings forecasts by up to 3% and reduced target prices by as much as 10%, reflecting cautious investor sentiment. The ability to translate cost efficiencies into sustained margin expansion while navigating a gradual demand recovery will be pivotal for Asian Paints and may set a benchmark for other consumer‑durable manufacturers facing similar macro‑economic headwinds.

Asian Paints faces near-term headwinds as weak Q3 dampens sentiment

By Snehal Mergu, ET Bureau · Last Updated: Feb 18 2026, 06:11 AM IST

Asian Paints continues to rely on cost savings, new product launches and steady performance in some non‑paint categories to support profitability as demand recovery remains gradual.

ET Intelligence Group: Asian Paints has lost 10 % on bourses since 27 January after a lacklustre December‑quarter performance rekindled worries over softening demand. The rebound in sentiment seen after the September‑quarter, driven by hopes of GST‑led price relief and festive‑season traction, has faded with an extended monsoon, a shorter festive period and intensifying competition weighing on the near‑term outlook. Though the paint major expects competitive pressure to remain intense in the short term, it has retained the FY‑26 guidance of 8‑10 % volume growth and 18‑20 % operating margin before depreciation and amortisation (EBITDA margin), supported by formulation and sourcing efficiencies. It also expects to gain market share over the next 12‑18 months driven by waterproofing and home‑decor segments.

Decorative volumes grew at a slower pace of 8 % in the December‑quarter compared with 11 % growth in the previous quarter, indicating lack of traction in the repainting activity. The international business revenue increased 6.3 % due to steady performance in key markets. With the loss‑making Indonesia business now out of the portfolio and lower raw‑material costs, the company expects steady but measured progress from offshore units.

A shift by consumers in discretionary spending towards travel and hospitality has resulted in lesser frequency of repainting. However, the rise in luxury and premium housing continues to show better growth at the higher end of the market, boosting demand for waterproofing solutions and construction chemicals.

Despite soft demand, EBITDA margin expanded by 90 basis points year‑on‑year to 20.1 %, led by lower raw‑material costs. Amid a cautious demand outlook, the company expects 5 % value growth for FY‑26, which lags its near‑double‑digit volume‑growth estimates, suggesting subdued pricing growth.

The home‑decor segment showed early signs of stabilisation with narrowing losses in the kitchen‑fittings segment and the bath segment inching towards breakeven. The decorative retail division remained under pressure, but commercial (B2B) and projects businesses continued to outpace the rest of the portfolio, driven by orders from factories and government clients.

Since growth has not picked up as expected, brokerages have trimmed earnings estimates for the company by 1‑3 % for FY‑26‑28 and cut the target price by up to 10 %. While margins remain strong, the slower‑than‑anticipated growth in the core decorative business has lowered expectations for the rest of the financial year. Asian Paints continues to rely on cost savings, new product launches and steady performance in some non‑paint categories to support profitability as demand recovery remains gradual.

Synopsis

Asian Paints stock dropped after a weak December quarter. Softening demand, extended monsoon, and competition impacted sentiment. The company expects market‑share gains in waterproofing and home‑decor. Despite slower decorative volume growth, margins expanded due to lower raw‑material costs. Brokerages have trimmed earnings estimates. Cost savings and new products will support profitability as demand recovery remains gradual.