Neutral Pidilite Industries; target of Rs 2650: Motilal Oswal

Motilal Oswal's research report on Pidilite Industries

Pidilite (PIDI) delivered healthy 10% volume growth and in-line EBITDA in 3QFY24. The Consumer and B2B segments clocked robust double-digit volume growth. Rural and small-town markets outpaced urban markets. Value growth (4%) was impacted by price cuts. n GM expanded 1,100bp YoY/150bps QoQ to 53% owing to benign raw material prices. VAM continued to decline to ~USD900/t from USD2,000/t in 3QFY23. n PIDI remains committed to stepping up investments in brand and customer engagement. EBITDA margin expanded by 700bp YoY/150bp QoQ to 23.7% (est. 23.2%). We model 23% EBITDA margin for FY25/FY26. n The lending business pilot is underway and will be launched in a southern Indian city in Feb’24. A dedicated team is established to work on the program at arm's length. The INR1b commitment over two years remains unchanged, depending on the pilot's success.

Outlook

PIDI stands out for its market-leading position in the adhesives market with a strong brand and a solid balance sheet. However, we believe the current valuation limits the upside potential. We reiterate our Neutral rating on the stock with a TP of INR2,650 (premised on 55x Dec’25 EPS).