Accumulate Pidilite Ind; target of Rs 225: Dolat Capital

Dolat Capital is bullish on Pidilite Industries and has recommended accumulate rating on the stock with a target of Rs 225 in its October 31, 2012 research report.

“Pidilite Industires’s consumer bazaar business grew by 19% (Volume - 11% and value - 8%). Industrial segment grew by 3.5% (Q2FY12 growth was at 18%) was driven by volumes. Export segment continues to be impacted due to slowdown in Europe market. We expect this to improve in coming quarters as base effect kicks in (Q3FY12 - Industrial business declined by 2%). Consumer bazaar business grew by 19% (Volume - 11% and value - 8%).Industrial segment grew by 3.5% (Q2FY12 growth was at 18%) was driven by volumes. Export segment continues to be impacted due to slowdown in Europe market. We expect this to improve in coming quarters as base effect kicks in (Q3FY12 - Industrial business declined by 2%).”

“Company indicated that in some of the product categories which are focusing on Industrial and Infrastructure project there are signs of slowdown. Construction chemicals product which targets the Infrastructure and large project segment is witnessing slowdown. VAM prices have now stabilised after a correction in Q1FY13. It currently stands at around $950-$1000/ton. Gross margin improvement was on account of 1) price hike and 2) softening of VAM prices. Ad-spends which was lower in Q1FY13 witnessed some increase in investment. Ad-spends to sales ratio during the quarter stood at 4% v/s 2.2% in Q2FY12. International business reported revenue of Rs 887mn up 7.3% (5.7% in terms of constant currency) and EBITDA loss of Rs 14.6mn.”

“We continue to remain positive on Pidilite Industries. Likely clarity on elastomer project in Jan 2013 will eliminate the overhang on the stock. We believe Dr. Fixit brand in the construction chemical has a huge potential and could be the next Fevicol. The stock trades at 25x FY13E EPS of Rs 7.6 and 19x FY14E EPS of Rs 9.8. We recommend accumulate with a price target of Rs 225,” says Dolat Capita; research report.

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