Target: ₹2,000

CMP: ₹2,300.35

While Asian Paints has given FY26E guidance of single digit revenue growth and margin range of 18-20 per cent, we believe it may lose market shares with single digit revenue growth. Grasim is likely to grow at faster pace with commencement of Maharashtra and West Bengal plants as well as distribution expansion. Berger and Akzo are also steadily gaining market shares and Asian Paints may need to raise selling expenses (ad-spend, trade incentives, distribution costs etc) to protect its market shares in FY26.

While correction in crude oil offers tailwinds, we believe Asian Paints will find it tough to even maintain its margin closer to lower band (i.e 18 per cent). Home Décor segment offers strong option value but we believe the resources will be largely utilised to protect market shares of core business of India Decoratives.

Any reduction in investments towards Home Décor/Beautiful Homes segment may materially affect its option value. We model FY27E PAT to be lower than FY24 PAT. With earnings decline over a long period (FY24-27), loss of market shares and reduction in return ratios, the premium valuations will be tested in FY26-27, in our view. We cut FY26E earnings by 2.5 per cent.

Published on May 9, 2025