Accumulate Pidilite Ind; target of Rs 255: Dolat Capital

Dolat Capital is bullish on Pidilite Industries and has recommended accumulate rating on the stock with a target of Rs 255 in its January 30, 2013 research report.
 
“Pidilite Industries, consolidated net sales at Rs 9.2b up 20% v/s our estimate of Rs 9.1bn. EBITDA at Rs 1.49bn up 22.7% (est Rs 1.53bn) as EBITDA margins expanded by 30bps to 16% (our estimate of 16.8%). Gross margins expanded by 138bps YoY to 44.8%. However, higher other expenditure up 185bps YoY restricted margin expansion. PBT at Rs 1.5bn was up 38% due to reversal of finance charges of FCCB and higher other income. Adj PAT growth of 33.5% to Rs 1.1bn v/s our estimate of Rs 997mn. Consumer Bazaar revenue grew by 22.6% to Rs 7.74bn and EBIT grew by 17.6% to Rs 1.57bn as margins declined by 87bps YoY to 20.4%. Industrial revenue grew by 15% to Rs 1.65bn and EBIT grew by 13.8% to Rs 183mn as margins remained flat 11%. The performance at the operating level in the industrial business has improved after 2 years.”
 
“We continue to remain positive on Pidilite Industries. We believe Dr. Fixit brand in the construction chemical has a huge potential and could be the next Fevicol. We expect improvement in operating performance coupled with sustain growth in Consumer Bazaar business would result in 18% CAGR in revenue and 24% CAGR in PAT during FY13-15E. We have upgraded our estimate by 3% to factor in better revenue growth. However, uncertainty with respect to elastomer project remains an overhang on the stock. The stock trades at 22x FY14E EPS of Rs 10.2 and 18.6x FY15E EPS of Rs 12.3. We recommend an Accumulate,” says Dolat Capital research report.

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