Pidilite Industries Ltd. share price target

We are reducing our EPS estimate by 9.9%/3.1% for FY/22/23 on the back of inflationary pressure in VAM prices which has increased from USD 1200/ton in 4Q21 to spot levels of USD 2000/ton. We continue to remain positive on long term story of PIDI given its strong presence in water proofing and construction chemicals due to first mover advantage and strong connect with trade. Huntsman acquisition is on track and will strengthen PIDI in Epoxy based adhesives which will lead to higher growth and profitability (~31.3% margins). Lower penetration in waterproofing market provides large...

Pidilite Industries (PIDI) reported consolidated Q4FY21 revenue growth of 45% YoY on a tepid base, with a 45%/26% rise in standalone C&B;/B2B volumes.

Given robust growth across the segment led by higher demand from rural and urban area will likely to support company's topline in coming quarters. However, we remain cautious on the stock, as uncertainty evolves around raw material prices. Hence, we maintain our HOLD rating on the stock with a revised TP of Rs. 1,847 based on rolled...

Margin to normalise with recovery in input cost going forward Raw material prices remained benign during the quarter (average consumption cost of US$800/t vs. US$940/t in Q3FY20). However, recovery in input prices (spot price of VAM US$1300/t) and restoration of advertisement costs, going forward, will result in normalised EBITDA...

Pick-up in economic activity in the areas of construction, automobile, furniture, etc. and continued weakness in raw material prices should benefit Pidilite in the months ahead. At current price levels however, the upside remains limited. We maintain our HOLD rating on the stock with a revised TP of Rs. 1,674 based on 60x FY22E adj. EPS. Topline back on pre-COVID levels, beats expectations Pidilite saw its Q2FY21 consolidated revenue shoot up to Rs. 1,880cr (+114.2% QoQ, +4.1% YoY) on account of substantial recovery seen across all its business segments....

Acquisition of Araldite to strengthen product portfolio Pidilite acquired HAMSPL for a cash consideration of ~| 2100 crore. The acquisition valued at ~5x sales (~50% discount to Pidilite's TTM MCap/sales) is fairly valued. HAMSPL manufactures and sells adhesives, sealants and other products under well-known brands such as Araldite, Araldite Karpenter and Araseal in India with a market share of ~30% (market leader in the epoxy adhesive category). We believe strong margin profile of HAMSPL (in line with Pidilite) and product profile would help expand...

Consolidated revenue grew by 4.1% y-o-y to Rs. 1,880.3 crore (driven by a sales and volume mix of 3.6%), ahead of our expectation of Rs. 1,842.9 crore. The consumer bazaar business registered volume and mix growth of 7.2%, while B2B (largely industrial products) business declined by 8.4% in Q2FY2021 (but recovered from 53% decline in Q1). Improved growth in the consumer business is attributable to double-digit growth in the rural markets and tier-IV towns. Globally, the American region registered a strong growth of ~52% in revenues and EBIDTA margins improved to 26% (excluding one-time tax gain of Rs. 9.5 crore). Benign input prices (largely those of VAM) aided in gross margins to remain high by 256 bps to 55.9%....

Pidilite's Q2FY21 results were ahead of our estimate as the improvement in business conditions was better than our anticipation. Consumer Bazaar segment has witnessed strong recovery with +9% growth (55% decline in Q1FY21). Though B2B reported 13% YoY...

PIDI has returned to growth trajectory with strong double digit growth from Rural and Semi Urban areas leading revival across Construction Chemical and DIY portfolio. B2B segment continued to face headwinds, however signs of recovery were visible in the fag end of the quarter. We remain positive on PIDI due to its strong business moat and sustained investment behind categories of future like 1) waterproofing 2) construction chemicals and aids 3) Wood coatings and 4) Floor coatings etc. We believe investment in Huntsman will not only provide PIDI with leadership position but will also...