We are marginally cutting FY23/24 EPS estimates by 2.1%/1.2% which factors in margin pressure in 1Q23 followed by gradual improvement. PIDI has given cautiously optimistic outlook with margins nearing bottom along with an expected demand recovery in 2H23. Near term rural & semi urban demand looks soft due to steep inflation & price hikes, while urban demand remains steady. Long term prospects remain intact led by 1) aggressive innovation in core & growth categories 2) adjacent segments like tiles and marble grouts adhesives to be next growth drivers 3) market leadership in a low penetrated waterproofing segment and 4) focus to improve distribution reach and quality in next 3-5 years.
OutlookWe expect 26.0% EPS CAGR over FY22-24 and assign a DCF based TP of Rs2389 (earlier 2417). Potential loss of leadership in waterproofing to APNT is a key risk to our call. Retain ‘Hold’.
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