Prabhudas Lilladher recommended Hold rating on Pidilite Industries with a target price of Rs 1415 in its research report dated August 07, 2020.
Prabhudas Lilladher's research report on Pidilite Industries
We are retaining Hold rating on PIDI post positive Mgt commentary suggesting sustained demand revival in July and expected margin expansion in 2H due to lower raw material prices. Despite near term uncertainty, Rural and Smaller towns (30% of Revenues) are leading revival across Construction Chemical and DIY portfolio and with ~90% of outlets now open, demand momentum is expected to continue. We remain positive on PIDI due to its strong business moat and sustained investment behind categories of future like 1) waterproofing 2) construction chemicals and aids 3) Wood coatings and 4) Floor coatings etc. we believe investment in Papperfry and Tenex India Stone Products will open further growth opportunities in its core categories. We would watch out for trends in Gross margins in FY22/23 as Pidilite had retained 500bps gross margin expansion during previous low raw material cycle.
We estimate 1.2% decline in FY21 EPS and 19.1% PAT CAGR over FY21-23. We value the stock at Rs1415 based on SOTP (45x Sep-22 to standalone business). Retain HOLD. We recommend accumulating PIDI on weakness for long term gains.
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