Mr. Bharat Puri (CEO, Pidilite) gave cautiously optimistic outlook on demand post 4 consecutive quarters of double digit volume growth. PIDI is well placed to capitalize on the growth opportunity in adhesive and sealants given strong brand like Fevicol and extension of Fevicol to new applications in line with construction trends. Emerging businesses like Nina, Percept (waterproofing services), ICA (wood coatings), Dr. Fixit (waterproofing), Roff (tiling solutions) and CIPY JV's (floor coatings) will emerge as key growth drivers in coming years. Rising VAM, packaging and depreciating rupee is near term concern; however, ~3% price increase in select products will prevent any meaningful margin compression. Bangladesh and Sri Lanka are likely to be major growth drivers in IBD. We estimate 14.6% sales and 16.3% PAT CAGR over FY18-20.
OutlookWe value the stock at 43xSept20 EPS and arrive at SOTP based target price of Rs1175. Retain Accumulate.
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