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Last Updated : Aug 11, 2020 07:12 PM IST | Source: Moneycontrol.com

Neutral Pidilite Industries; target of Rs 1335: Motilal Oswal

Motilal Oswal recommended Neutral rating on Pidilite Industries with a target price of Rs 1335 in its research report dated August 08, 2020.

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Motilal Oswal 's research report on Pidilite Industries


Pidilite (PIDI) reported 56.5% decline in consolidated sales (58.3% volume decline), with EBITDA/PAT decline of 85%/95%. However, the performance came in better than our expectation of loss in both EBITDA and PAT. The improving demand scenario is likely to lead to positive topline and earnings growth in 2HFY21. However, the B2C nature of the business and a continued wariness among the urban consumer mean earnings growth over FY20–22 is likely to be muted. As PIDI delivered a profit against our expectations of a loss in 1QFY21, we have increased our PAT estimates for FY21 and FY22 by 26.1% and 4.7%, respectively. We expect sales/EBITDA/PAT CAGR at 6.8%/7.8%/5.3% over FY20–22E, continuing the trend of 7–8% sales/EBITDA and PBT growth in the last four years. While the structural investment case remains intact, the recent earnings track record, lower ROCEs (in the mid-20 levels) v/s consumer peers, and valuations of 54x FY22 do not leave much room for us to turn constructive from a one-year perspective. Maintain Neutral.


Outlook


While the structural investment case remains intact, the recent earnings track record, lower ROCEs (in the mid-20 levels) v/s consumer peers, and valuations of 54x FY22 do not leave much room for us to turn constructive from a one-year perspective. Maintain Neutral, with TP of INR1,335 (50x Jun’22 EPS).


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First Published on Aug 11, 2020 06:59 pm
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