Pidilite shares slump 5% on below-estimate Q4 results; analysts mixed on Fevicol maker

Higher other expenses impacted Pidilite's operating performance in Q4FY24. The company made higher investments in brands and customer facing initiatives.

Shares of Pidilite Industries fell over 5 percent on May 8, the biggest intraday fall in 4 months. The sharp decline comes a day after the adhesives, sealants and construction materials manufacturer reported a mixed set of numbers for the quarter ended March 2024.

The company's consolidated net profit for the quarter rose 19.3 percent on-year to Rs 364 crore while revenue grew 7.9 percent to Rs 2,902 crore, missing street estimates.

Foreign brokerages Citi and Macquarie maintained their negative views on Pidilite following the Q4 results. Meanwhile, Goldman Sachs and Nuvama Institutional Equities maintain a 'buy' rating on the stock.

Citi has a 'sell' rating for Pidilite stating that the Fevicol maker's earnings missed its estimates on all fronts. The brokerage has pegged the target price at Rs 2,200 per share, implying a downside of more than 24 percent from the last closing price,

Macquarie retained its 'underperform' rating on Pidilite Industries stock with a target price of Rs 2,300 on Q4 EBITDA missing estimates. The brokerage believes that higher brand investments led to the growth in other expenses for the company.

Both urban and rural markets grew for Pidilite in the Q4, with rural markets outpacing urban growth. However, analysts at Macquarie have flagged near-term demand concerns.

Despite the disappointing Q4 numbers and expectations of short-term softness in the environment in the near term, the Mumbai-based company remained optimistic about market demand in the medium term, with an overall increase in construction activities, government spending and increasing prosperity.

Contrary to Citi and Macquarie, Nuvama Institutional Equities has maintained a 'buy' rating on Pidilite with a target price of Rs 3,220 per share. The brokerage, however, said that it will revisit estimates and target price post the earnings conference call scheduled later in the day.

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Goldman Sachs also remained bullish on the Fevicol maker after Q4 results as strong double-digit growth continued for the company. It believes that a large part of gross margin was likely invested into advertising and promotion (A&P). The management commentary on near-term demand softness was surprising for the analysts.

At 11:15 am, Piditlite shares were trading at Rs 2,805.05 apiece on the National Stock Exchange (NSE), down nearly 5 percent from the previous close. The stock has fallen around 10 percent in the last five sessions, wiping the majority of the year-to-date returns.

In the last one year, the stock has risen around 14 percent, underperforming benchmark Nifty 50 which has risen 21 percent during this period.