Neutral Pidilite Industries; target of Rs 3200: Motilal Oswal

Motilal Oswal's research report on Pidilite Industries

Pidilite Industries (PIDI) reported consolidated revenue growth of 11% YoY in 1QFY26. Standalone revenue grew 11% YoY with underlying volume growth (UVG) of 10% (est. 12%). Value/volume growth stood at 10%/9% YoY in consumer business and 12%/13% in B2B business. The impact of pricing is coming down and is likely to stay at the same level for the rest of FY26. Rural growth continues to outperform urban growth. In FY26E, we model 10% volume growth and 12% revenue growth. Gross margin (GM) expanded 30bp YoY but contracted 90bp QoQ to 54.1%. GM is expected to remain stable, with no major volatility in VAM prices. PIDI continues to prioritize reinvestment in brand building and customer acquisition. EBITDA margin grew 110bp YoY to 25.1%, an 18-quarter high. EBITDA grew strongly by 16% YoY. Consolidated EBIT growth for the consumer business was healthy at 18% YoY (10% in FY25). B2B business EBIT growth stood at 20% (53% in FY25).

Outlook

PIDI’s volume growth trajectory is inspiring, particularly in the current challenging environment. Operating margins are at elevated levels (>23% EBITDA margin), and the company expects margin expansion to continue in FY26. Given rich valuations, we reiterate our Neutral rating on the stock with a TP of INR3,200 (55x Jun’27E EPS).