Asian Paints Q1 Preview: Tepid demand to weigh on sales, profit may slip in mid-single digits

Mumbai, July 28, 2025 — As Asian Paints prepares to announce its Q1FY26 earnings later this week, analysts anticipate subdued performance across revenue and profit metrics, citing softening demand in both decorative and industrial paint segments. Industry experts project a mid-single-digit year-on-year decline in net profit, primarily due to volume weakness and high base impact, despite relatively stable input costs.

Muted Festive Pipeline and Weak Rural Demand Damp Outlook

The April–June quarter is seasonally one of the slower periods for the paints industry. However, the anticipated slowdown in rural discretionary spending, coupled with an uneven monsoon and delays in real estate completions, are expected to aggravate headwinds.

"Demand remained lukewarm in both rural and urban areas, with no strong triggers such as festivals or major wedding activity. Additionally, higher competition from organized and unorganized players has capped pricing power," said Milan Desai, Consumer Analyst at JM Financial.

Brokerages expect revenue growth to remain flat or rise marginally by 2–4% YoY, driven more by modest price hikes than by strong volume uptick. Some believe that project institutional demand may provide partial cushioning, but not enough to offset the slowdown in the retail segment.

Profit Margins Likely to Narrow Slightly

Despite relatively benign raw material costs—particularly for titanium dioxide and crude derivatives—analysts suggest that margin expansion may not materialize meaningfully in Q1FY26. The company has already passed on most of the cost advantages to customers over the past two quarters, leaving limited room for further margin gains.

According to an ICICI Securities report, EBITDA margin is expected to remain steady around 20–21%, compared to 21.4% in Q1FY25. Net profit could decline by 4–6% year-on-year, largely due to a high base and subdued top-line performance.

"While raw material inflation has remained under control, the company has been unable to capitalize on it fully due to weak demand elasticity," noted Sakshi Gupta, Equity Research Head, KR Choksey.

Segment Performance: Premium Paints Hold, Industrial Segment Lags

Asian Paints’ decorative segment, which contributes over 80% of its revenue, is expected to have seen marginal growth. Premium products and waterproofing solutions may continue to outperform economy offerings, as price-sensitive customers defer upgrades or shift to smaller pack sizes.

Conversely, the industrial coatings and automotive segment may have underperformed, affected by uneven demand in the auto and OEM sectors. A slowdown in export orders also likely weighed on the segment's contribution.

“Premiumization remains a bright spot, but rural reach and repainting cycles are under stress. We believe Asian Paints will maintain market share but may struggle to expand it this quarter,” said Ravi Ahuja, senior analyst at Axis Capital.

Stock Performance and Valuation Check

Shares of Asian Paints (NSE: ASIANPAINT) have remained range-bound over the past three months, trading between ₹2,900 and ₹3,200 amid cautious investor sentiment. As of July 26, the stock is down nearly 2.3% year-to-date, underperforming the broader Nifty FMCG index.

At a trailing P/E of ~56x, Asian Paints continues to trade at a premium to peers like Berger Paints and Kansai Nerolac, reflecting its market leadership and strong brand equity. However, analysts warn that valuations may come under pressure if demand does not rebound convincingly in Q2FY26.

Analyst Expectations at a Glance

(Source: Brokerage estimates)

Investor Outlook: Eyes on Rural Revival and Q2 Momentum

With the monsoon expected to normalize in August and pre-festive demand picking up in Q2, investors will be closely watching management commentary for any signs of recovery. Key triggers include rural demand revival, repainting season outlook, and input cost trends.

Asian Paints’ long-term growth narrative remains intact due to its strong distribution, innovation pipeline, and premium product strategy. However, in the near term, investors may need to temper expectations and focus on operational resilience rather than headline growth.

“We maintain a neutral stance ahead of the results, with a preference for accumulation on dips,” said Anita Sinha, Head of Research at Edelweiss Securities.

As Q1 earnings loom, Asian Paints is likely to report a cautious quarter reflecting broader macro pressures and cyclical weakness in consumption. While the long-term story is supported by structural factors, the immediate outlook remains clouded by demand-side fragility. Market participants will be watching not just the numbers, but the tone and strategy shared by the management for the upcoming festive and repainting season.