Neutral Pidilite; target of Rs 1605: Motilal Oswal

Motilal Oswal's research report on Pidilite

As a part of our Wealth Creation Study (Link) released yesterday, Mr Bharat Puri – MD of Pidilite (PIDI), highlighted certain factors he attributes to PIDI being ranked a) second among all-round wealth creators over 1995–2020; b) fourth among the most consistent wealth creators over 1995–2020; c) among the biggest wealth creators over 1995–2020. Moreover, the company has been ranked the most consistent wealth creator of the recent decade (2010–20). While near-term valuations at 68.2xFY22 EPS appear challenging, two main factors have resulted in robust topline and earnings growth for PIDI in the past; these are likely to help sustain strong growth in the future as well. A) PIDI has a remarkable longer term track record of innovation, aimed at meeting unmet consumer needs. B) Innovation is supported by outstanding sales and distribution as well as a ‘pro-neurial’ culture, which has the best of professional efficiency and entrepreneurial spirit. In recent years – as we highlighted in a detailed note in September – the company is increasingly focusing on the ‘Growth’ and ‘Pioneer’ categories to boost overall topline growth.

Outlook

We maintain Neutral, with TP of INR1,605 (55x Dec’22E EPS).