Hold Pidilite Industries target of Rs 1819: Prabhudas Lilladher

Prabhudas Lilladher's research report on Pidilite Industries

We are reducing our EPS estimate by 9.9%/3.1% for FY/22/23 on the back of inflationary pressure in VAM prices which has increased from USD 1200/ton in 4Q21 to spot levels of USD 2000/ton. We continue to remain positive on long term story of PIDI given its strong presence in water proofing and construction chemicals due to first mover advantage and strong connect with trade. Huntsman acquisition is on track and will strengthen PIDI in Epoxy based adhesives which will lead to higher growth and profitability (~31.3% margins). Lower penetration in waterproofing market provides large headroom for growth and despite pressure from Paint companies PIDI remains confident as market for waterproofing has been expanding due to increased consumer awareness and acceptance. B2B and export are expected to perform better in FY22 despite lockdowns however retail will be impacted in FY22.

Outlook

We revise our DCF based target price to Rs 1819 (earlier Rs 1739). Retain Hold.