Monsoon Damps Festive Mood! Will Paint Giants Miss the Profit Brushstroke? Asian Paints, Nerolac TP Revealed!

Paints Sector Stock: Unprecedented rains across multiple Indian states due to adverse weather conditions this monsoon are likely to dampen the demand for decorative paints. Weak demand, combined with no direct benefit of the GST rate cut, has dampened the prospects of paint sector companies like Kansai Nerolac Paints and Asian Paints, noted PL Capital in its report.

Kansai Nerolac Paints shares closed 0.44% lower at Rs 246.5 per share with a market capitalisation of Rs 19,929.59 crore on BSE on Monday. Asian Paints shares ended 1.65% lower at Rs 2,502 per share on BSE.

Fall In Demand For Decorative Paints

High competitiveness, due to the entry of new players like Birla Opus, lower consumer prices, and a slump in demand caused by adverse weather conditions in North Indian states, will affect the growth outlook of paint sector stocks, noted PL Capital in its report.

Strong word-of-mouth publicity and aggressive promotion of Birla Opus paints may also impact the business of existing players in the industry.

"We expect Kansai to be most affected given higher disruption in the north and slow auto sales due to GST rate cuts (benefit likely from 3Q). Asian Paint and Berger seem better placed as impact in North was offset by good demand in West & South, while East is witnessing normal demand ahead of the festive season," noted PL Capital in its report.

A significant slump in the demand for decorative paints in the second quarter of the financial year 2025-26 is expected, according to PL Capital. Other than decorative paints, industrial paints are also witnessing a slump in demand as auto sales remain muted for the second consecutive month ahead of the GST rate cut implementation on September 22.

"As per our channel check, industry is expected to see high single-early double-digit volume declines in the worst-hit North states, partly compensated for by West/South and East pockets with normalising trends. We expect recovery in the North to be in Q3 as sites dry and repair jobs kick in," the brokerage added in its report.

No GST Rate Cut Direct Benefit

The sector didn't see any reduction in the GST rate cut announced by the GST council earlier this month. GST rates on paints and adhesives will remain 18% after the implementation of new GST rates.

However, a sharp turnaround is expected in sales due to the indirect impact of the GST rate cut. "Given the sharp cut in GST rates on Auto OEM, we expect a strong rebound in volume growth from 3Q26 onwards, which would benefit Kansai as Auto paints account for ~30% of total paint sales," stated the brokerage.

Asian Paints, Nerolac, Pidilite Target Price

Stock Name	Rating	Target Price	Current Market Price (On Sept 15)
Asian Paints	Reduce	2248	2408
Kansai Nerolac Paints	Accumulate	277	244
Pidilite	Buy	3427	3051

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