Hold Pidilite Industries, target of Rs 2515: Sharekhan

Sharekhan's research report on Pidilite Industries

Pidilite Industries Limited’s (Pidilite’s) Q3FY2023 performance was muted with 5% y-o-y revenue growth, while EBITDA margin fell by 272 bps y-o-y to 16.5% due to higher input prices, weaker currency, and high-cost inventory. PAT declined by 14% y-o-y. VAM prices have corrected to $1,200 per tonne from highs of $2,500 per tonne (consumption price was at $2,000 per tonne in Q3). The company expects EBIDTA margins to sequentially improve (likely to touch 20% in Q4). Q3 performance was impacted by inventory pile up by stockiest in the base quarter. Management has seen demand remaining resilient in the Tier 1,2 & 3 market while rural markets continue to reel under pressure. Management retained its targets of double digit volume growth in the medium term.

Outlook

The stock trades at 62.6x and 52.5x its FY2024E and FY2025E earnings. In view of premium valuations and near term demand headwinds. We retain Hold with a revised price target of Rs. 2,515.