Asian Paints targets FY27 volume growth as pricing supports margins

Investment View and Valuation

ICICI Securities retained its BUY recommendation on Asian Paints Ltd. in its June 1, 2026 result update and revised the target price to Rs 3,180. The broker expects revenue and earnings to grow at a CAGR of 14 per cent over FY26-FY28E. The target price is based on valuing Asian Paints at 52 times FY28E EPS of Rs 61.0.

Q4FY26 and FY26 Financial Performance

Asian Paints reported consolidated Q4FY26 revenue growth of 10.6 per cent year-on-year to Rs 9,246.7 crore. Decorative paints volume growth was 12.4 per cent, ahead of the company’s guided 8-10 per cent range. Gross margin expanded 87 basis points year-on-year to 44.8 per cent, aided by 1.4 per cent raw-material deflation.

EBITDA increased 24.4 per cent to Rs 1,786.6 crore, while EBITDA margin expanded 214 basis points to 19.3 per cent. The improvement was supported by lower input costs, cost-saving measures and premiumisation. Adjusted PAT after minority interest rose 40.9 per cent year-on-year to Rs 1,185.5 crore, helped by stronger operations and higher other income.

For FY26, consolidated revenue rose 4.9 per cent to Rs 35,583.5 crore. EBITDA grew 11.5 per cent to Rs 6,695.9 crore, while EBITDA margin improved 110 basis points to 18.8 per cent. Adjusted PAT after profit from associates increased 13.3 per cent to Rs 4,512.9 crore.

The board recommended a final dividend of Rs 23 per share for FY26, with payout remaining broadly consistent at 60 per cent in recent years.

FY27 Growth Outlook

Management expects decorative-paints volume growth of 8-10 per cent in FY27. Growth is expected to be driven by rural demand, distribution expansion, faster growth in the decorative industrial B2B business and premium-product demand.

Demand improved through Q4FY26, with all three months recording double-digit growth. Management said channel stocking before announced price hikes added around 3-4 per cent to March growth, although underlying consumption was the principal driver. It also cited continued demand momentum in April and May, expectations of a normal monsoon, improving rural consumption and an extended festive season.

Asian Paints has implemented price increases of 10-11 per cent to mitigate input-cost inflation and may take further action depending on crude-price trends. ICICI Securities expects the standalone business to grow in the mid-teens in FY27.

Margins, Input Costs and VAM-VAE Project

The broker notes that crude-price inflation in late Q4FY26 resulted in around 20 per cent input-cost inflation. Management nevertheless maintained its near-term EBITDA-margin guidance of 18-20 per cent.

ICICI Securities expects margin to remain near the lower end of guidance in H1FY27 before improving in H2FY27 if input prices stabilise. The broker forecasts FY27 EBITDA margin of 18.2 per cent.

The VAM-VAE project is on track for first-phase commissioning in H1FY27. Its benefits should begin in H1FY27 but largely accrue in H2FY27 and over the following 1.5-2 years as production and internal consumption ramp up. Management views the backward-integration project as supporting supply security, innovation and green-paint competitiveness.

Home Décor and Industrial Businesses

Asian Paints’ home décor businesses showed improving trends in Q4FY26. Kitchen revenue rose 16.5 per cent to Rs 99 crore and its loss narrowed to Rs 1 crore. Bath revenue grew 3.3 per cent to Rs 95 crore, while PBT improved to Rs 4 crore from a loss a year earlier.

The industrial business grew 18.4 per cent. PPG-AP revenue increased 20.8 per cent to Rs 586 crore, while AP-PPG revenue rose 15 per cent to Rs 399 crore.

Estimates and Key Risks

ICICI Securities raised FY27E and FY28E revenue estimates by 7.2 per cent and 6.5 per cent, respectively, reflecting stronger pricing-led growth. However, it reduced margin assumptions because of the higher raw-material inflation expected in H1FY27.

Key risks identified by the broker are:

• Sustained competition from a new entrant, which could pressure margins.
• A significant increase in raw-material prices, affecting gross margins.
• An urban-demand slowdown, reducing decorative-paints volume growth.