Sharekhan's research report on Pidilite Industries
Pidilite Industries Limited’s (Pidilite) Q2FY2023 performance was soft with 15% y-o-y revenue growth, driven by pricing and mix (sales volume remained flat), while EBITDA margin fell by 433 bps y-o-y to 16.6% due to higher input prices, weaker currency, and high-cost inventory. PAT declined by 10% y-o-y. VAM prices have corrected to $1,200-1,400 per tonne from highs of $2,500 per tonne (consumption price was at $2,491 per tonne in Q2). Thus, EBITDA margin would start recovery from Q3FY2023 and is expected to reach 20% by Q4FY2024. Demand was soft in Q2 as rural and semi-urban regions witnessed higher impact of inflation. Management is cautiously optimistic for improved demand in H2, led by better monsoon, pick-up in construction activities, and stable input inflation. Management is targeting double double-digit volume growth in FY2023.
Outlook
The stock has good run-up of 20% in the last six months and is currently trading at 95x/67x its FY2023/FY2024E earnings. We retain Hold with an unchanged PT of Rs. 2,850.
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