Asian Paints is facing renewed pressure from investors after its September-quarter results showed that rising raw material costs are eating into profitability despite healthy revenue growth. Several leading brokerages have lowered their target prices for the stock, warning that margin recovery could take longer as competition intensifies and input costs remain elevated.
The country’s largest paint manufacturer reported a 7.5% year-on-year increase in consolidated net profit to ₹1,067.6 crore in the second quarter of FY27. Revenue from operations rose 16.9% to ₹9,953.9 crore. However, total expenses increased faster, climbing around 19%, reflecting higher material costs and supply-related challenges.
Operating profit grew just 3.6% to ₹1,557.1 crore, while the operating margin contracted to 15.6% from 17.7% a year earlier. The gap between revenue growth and operating earnings has become the main concern for analysts assessing Asian Paints’ near-term performance.
Managing director and chief executive Amit Syngle said the company faced sharp raw material inflation and supply constraints linked to geopolitical disruptions during the quarter. Asian Paints absorbed part of the cost increases to protect consumer demand while introducing calibrated price hikes. It is now planning further staggered increases in the coatings business and stepping up cost-efficiency measures.
The domestic coatings business recorded value growth of 16.4%, supported by volume growth of 6.8%. Decorative paints in India registered 14.5% value growth, while volumes increased 6.4%. Industrial coatings performed better, with value growth of 31.8%.
The international business also reported strong sales growth, but profitability remained uneven. International sales increased 29.5% to ₹1,095.6 crore, while segment profit before tax fell 31% to ₹52.7 crore.
Brokerages have responded differently to the results, although several have reduced their valuations. Jefferies retained its Buy recommendation but cut its target price to ₹3,025 from ₹3,350. It expects festive and wedding-season demand, improved product mix and additional price increases to support a recovery in the second half of FY27. However, it identified raw material price volatility and competition as key risks.
The key issue is whether the company can convert its strong sales growth into better earnings. Price increases, improved product mix and festive demand could provide support, but persistent inflation and competition from newer players remain significant challenges. The next few quarters will show whether Asian Paints can deliver the margin recovery it has promised.
Goldman Sachs maintained its Sell rating and lowered its target price to ₹2,375 from ₹2,725. The brokerage said revenue growth was better than expected, but operating earnings missed estimates. It also pointed to slower decorative paint volume growth and a sharp contraction in gross margins. Goldman Sachs expects elevated costs and competitive pressure to delay a meaningful recovery.
HSBC retained its Hold rating but reduced its target price to ₹2,420 from ₹2,650. It cited higher input costs, adverse product mix and competitive intensity as factors weighing on margins. CLSA continued with its Underperform rating and a target price of ₹1,925, arguing that price increases have not been sufficient to offset inflation.
Systematix maintained its Buy rating but cut its target price to ₹2,885 from ₹3,285. It expects volume growth to improve as festive and wedding demand strengthens, although raw material costs could continue to affect margins. JM Financial retained its Add recommendation while reducing its target price to ₹2,595 from ₹2,930.
Macquarie was among the more positive voices, retaining its Outperform rating and target price of ₹3,300. It expects price increases and backward integration to support profitability over the medium term. Equirus Securities also maintained a positive stance, although it lowered its target price to ₹2,967 from ₹3,212.
Asian Paints has retained its FY27 EBITDA margin guidance of 18-20%. Management expects further price increases and cost-control measures to help offset inflation. The company is also preparing a further round of staggered price hikes, with a 3.5% increase expected to take effect in the third quarter, according to brokerage assessments.
The company’s planned manufacturing facility at Dahej in Gujarat is another factor being watched by investors. The facility is expected to strengthen backward integration and reduce dependence on external suppliers, potentially improving costs over the medium term.
Asian Paints also announced an interim dividend of ₹5.75 per share for FY27. November 4 has been fixed as the record date, with payment scheduled by November 13 to eligible shareholders.