Buy Pidilite Industries; target of Rs 181: Motilal Oswal

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Buy Pidilite Industries; target of Rs 181: Motilal Oswal

Motilal Oswal is bullish on Pidilite Industries and has recommended buy rating on the stock with a target of Rs 181 in its February 7, 2012 research report.

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Motilal Oswal is bullish on Pidilite Industries and has recommended buy rating on the stock with a target of Rs 181 in its February 7, 2012 research report.

"Pidilite Industries (PDID) 3QFY12 results were disappointing with adjusted PAT declining 7% YoY to INR790m (vs our estimate of INR920m). Sales grew 16.5% YoY to INR6.9b led by ~14-15% volume growth in consumer and bazaar product segments. Gross margins declined 330bp to 43.2% due to steep INR depreciation and higher VAM (Vinyl Acetate Monomer) prices on a YoY basis. Industrial products segment reported 2% decline in sales and 43% decline in profits due to poor export demand and inventory de-stocking. We have lowered our FY12 EPS estimates by 5% and FY13 EPS estimates by 2.6% to factor in lower margins in the consumer business due to high input costs and declining sales in industrial chemicals. However, going forward, we believe the company would gain from appreciating INR as VAM prices have eased to USD1,000/MT."

"We remain positive on volume growth in the consumer and Bazaar segments despite the management's cautious outlook. We also believe margins in the consumer and Bazaar segments would start expanding from 1QFY13; however, the industrial chemicals segment's margins would take time to recover. We introduce our FY14 EPS estimate at INR10.1/share and forecast 25% PAT CAGR over FY12-14. The stock price has reacted from INR190 levels due to concerns over falling margins and growth outlook. It trades at 17.3xFY13E EPS of INR8.3 and 14.1xFY14E EPS of INR10.1. Maintain Buy with target price of INR181, 27% upside from the current level," says Motilal Oswal research report. 

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To read the full report click on the attachment