Axis Securities has upgraded Asian Paints to a BUY rating with a revised target price of Rs 3,130 per share, implying an upside potential of approximately 17% from the current market price of Rs 2,672. The upgrade follows a stronger-than-expected Q4FY26 performance, supported by double-digit volume growth, margin expansion, and improving demand trends across domestic and international markets. Management remains confident about sustaining volume growth despite competitive pressures and geopolitical uncertainties. With raw material costs remaining favorable, operational efficiencies improving, and several strategic growth initiatives underway, Asian Paints appears well-positioned to enter a new phase of earnings expansion over the next two years.

Axis Securities Turns Positive on Asian Paints After Strong Q4FY26 Performance

Axis Securities has upgraded Asian Paints from HOLD to BUY after the company delivered a robust earnings performance during Q4FY26. The brokerage also raised its target price from Rs 2,700 to Rs 3,130, reflecting growing confidence in the company's ability to sustain growth despite heightened competition in India's decorative paints market.

The upgrade comes after Asian Paints reported a broad-based recovery across key business segments, particularly in its core decorative paints business, where volumes accelerated significantly during the quarter.

Decorative Paints Business Leads Recovery

Asian Paints reported consolidated revenue of Rs 9,247 crore during Q4FY26, representing a healthy 10.6% year-on-year increase. The standout feature of the quarter was the performance of the domestic decorative segment, where volume growth surged to 12.4%, substantially ahead of industry trends.

Management highlighted that rural markets continued to outperform urban regions, while premium products under the company's PreLux portfolio helped improve realizations. The contribution of newly launched products also strengthened, accounting for nearly 17% of total revenues, demonstrating the company's ability to drive innovation-led growth.

Even amid intense competition and a challenging demand environment, Asian Paints managed to deliver strong execution, reinforcing its market leadership position.

Margin Expansion Provides Major Earnings Boost

One of the most encouraging developments during the quarter was the significant improvement in profitability.

Gross margins expanded by 87 basis points year-on-year to 44.8%, primarily supported by approximately 1.4% raw material cost deflation and effective procurement strategies.

As a result, EBITDA increased by 24.4% year-on-year to Rs 1,787 crore, while EBITDA margins improved by 214 basis points to 19.3%. The improvement reflects a combination of lower input costs and disciplined cost-control measures across operations.

Adjusted profit after tax rose sharply by 69.3% year-on-year to Rs 1,172 crore, substantially exceeding analyst expectations.

Growth Outlook Remains Constructive Despite External Risks

Management remains optimistic regarding future demand conditions despite concerns surrounding inflationary pressures linked to geopolitical tensions in West Asia.

The company is targeting 8%-10% volume growth in the coming period, supported by a longer festive season and favorable consumer demand trends. To protect profitability, Asian Paints has implemented cumulative price increases of approximately 10.4% in the domestic decorative business while continuing to focus on sourcing efficiencies and productivity initiatives.

Axis Securities believes Asian Paints will continue outperforming industry growth rates and expects earnings momentum to remain intact over FY27 and FY28.

Strategic Initiatives Strengthen Long-Term Growth Story

Several strategic initiatives are expected to support Asian Paints' long-term growth trajectory:

Manufacturing Expansion

The company plans to expand manufacturing capacity by over 30%-40%, strengthening its ability to capture future demand growth.

Backward Integration Projects

Asian Paints has announced plans to establish VAE and VAM manufacturing facilities alongside a cement plant through a joint venture in Fujairah, UAE. These initiatives are expected to improve raw material security and reduce long-term cost volatility.

Innovation-Led Product Development

The company continues investing in next-generation emulsions and waterproofing products based on nanotechnology, helping strengthen premiumization efforts.

Brand Building Through Cricket

Its partnership with the Board of Control for Cricket in India (BCCI) provides year-round brand visibility and supports customer engagement through innovative marketing campaigns.

Home Décor Ecosystem Continues to Gain Traction

Asian Paints' broader home décor strategy is beginning to show encouraging results.

The Kitchen business recorded revenue growth of 16.5%, while the Bath segment expanded by 4%. White Teak delivered a strong 16.8% increase in sales, and Weatherseal posted an impressive 25% growth, benefiting from wider product offerings and stronger distribution capabilities.

These businesses are gradually moving toward profitability and could emerge as meaningful growth drivers over the medium term.

Industrial and International Operations Deliver Strong Performance

The industrial coatings segment remained a bright spot.

PPG Asian Paints reported revenue growth of 20.9% year-on-year to Rs 586 crore, supported by robust demand from automotive and industrial customers. Meanwhile, APPPG revenues increased 15% year-on-year to Rs 399 crore, driven by protective coatings demand.

International operations also posted a healthy performance.

Revenue from overseas markets rose 11% year-on-year to Rs 888 crore, while profitability improved significantly. Profit before tax from international operations jumped 97%, aided by strong performances in Sri Lanka, UAE, and Egypt, as well as the exit from loss-making operations in Indonesia.

Revised Earnings Estimates Signal Confidence

Axis Securities has increased its earnings forecasts following the quarterly results.

The brokerage now expects net sales to reach Rs 39,630 crore in FY27 and Rs 44,153 crore in FY28, while net profit is projected at Rs 5,677 crore and Rs 6,386 crore, respectively.

Valuation and Investment Levels

Brokerage Rating: BUY
Current Market Price: Rs 2,672
Target Price: Rs 3,130
Potential Upside: 17%
Valuation Basis: 47x March 2028 estimated EPS
FY28 Estimated EPS: Rs 66.6

Investors may consider accumulating the stock on market weakness, particularly given the company's dominant franchise, improving earnings outlook, margin expansion opportunities, and multiple long-term growth drivers.

Risks Investors Should Monitor

Despite the positive outlook, certain risks remain relevant:

• Higher-than-expected competitive intensity.
• Prolonged slowdown in decorative paints demand.
• Unexpected inflation in raw material costs.
• Geopolitical disruptions affecting supply chains and input costs.
• Currency volatility impacting international operations.

Investment View

Asian Paints appears to be entering a renewed growth cycle after several quarters of subdued performance. Strong volume recovery, improving margins, expanding international profitability, and a growing home décor ecosystem provide multiple earnings levers. With management guiding for healthy volume growth and Axis Securities raising earnings estimates across FY27 and FY28, the stock's risk-reward profile has improved considerably. The revised target price of Rs 3,130 suggests meaningful upside potential, making Asian Paints an attractive large-cap consumption play for long-term investors.