Buy Pidilite Industries; target of Rs 3428: Prabhudas Lilladher

Prabhudas Lilladher's research report on Pidilite Industries

PIDI continues strong UVG at 9.8% in 4Q, and 160bps gross margin expansion given benign input costs. PIDI continues to focus on strong volume-led profitable growth led by its strategy of developing pioneer categories and entering newer segments. B2B continued its growth momentum driven by Industrial & Project verticals whereas B2C improved sequentially. IBD has witnessed a flattish sale while maintaining stable margins. PIDI is open to exploring tie ups and entry in segments like adhesives or specialty chemicals for EV/Semiconductor or electronic manufacturing, however it is long haul business. PIDI is well placed to sustain growth sustained innovations, tie-ups to bring technologically advanced products and 2-4x growth in pioneer and growth categories (45% of sales).

Outlook

Near term margin outlook seems fine, although margins leave little scope of expansion from current levels. We estimate 12.1% EPS CAGR over FY25-27 and assign DCF based target price of Rs3428 (Rs3318 earlier). Upgrade to Buy.