Pidilite slips on weak Q3 show, demand in rural, semi-urban areas under strain
Operating margins of the company fell 16.5 percent in the quarter versus 18.9 percent in the year-ago period due to high cost inventory
January 25, 2023 / 10:53 AM IST
Pidilite Industries: Pidilite Industries Q3 profit tanks 14% to Rs 308 crore on lower operating margin. Revenue grows 5%. The adhesives, sealants and construction chemicals manufacturer has reported a 14.3% year-on-year decline in consolidated profit at Rs 307.7 crore for quarter ended December FY23, impacted by lower operating margin. Revenue grew by 5.2% to Rs 2,998 crore compared to year-ago period with C&B business growing at 7%, as in Q3FY22, it had registered very high growth as a result of trade increasing inventory stocking because of substantial price increases in the quarter. Overall numbers missed analysts' expectations.
Shares of Fevicol-maker Pidilite Industries took a beating on January 25 after the company's net profit tanked 14 percent on-year to Rs 308 crore on lower operating margin.
Revenue grew by 5.2 percent to Rs 2,998 crore over the last year with Consumer and Bazaar (C&B) business growing 7 percent on a high base. It had registered very high growth in the third quarter as a result of trade channels stocking inventory ahead of price increases.
At 10:30am, the stock was quoting at Rs 2,321 on the NSE, lower by 2.5 percent. Trading volumes at 414,851 were double the 20-day average volumes of 280,218.
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Operating margins of the company fell to 16.5 percent in the quarter versus 18.9 percent a year ago.
"While input prices have moderated, this is yet to reflect in our gross margins as we were consuming high priced inventory this quarter. While demand conditions in rural and semi urban area remain under strain, we are increasingly optimistic of the future," Bharat Puri, Managing Director at Pidilite Industries, said.
"This is as a result of the significant input cost reductions as well as increased construction activity along with governmental initiatives in capex and the rural sector," he added.
Volume growth has also disappointed. Pidilite's consumer business has posted volume growth of 1 percent against the Street expectations of 4-5 percent.
Foreign brokerage firm Macquarie has an 'underperform' rating on the stock with a target price of Rs 2,200 per share. "Three-year sales CAGR has moderated sequentially," it noted. Domestic brokerage firm Motilal Oswal Financial Services has a 'neutral' rating on the stock.
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