Reduce Pidilite Industries; target of Rs 1419: Dolat Capital

Dolat Capital's research report on Pidilite Industries

Pidilite’s Q1FY21 results was below our estimate as the impact of lock down was more than our anticipation. Nevertheless, the company witnessed sequential improvement from May to July is encouraging. Consumer Bazaar segment has witnessed strong improvement in July, however, B2B business still remains under pressure. In addition, rural areas have witnessed faster recovery compared to urban. Going ahead, we believe that the company’s strong brand portfolio and wide distribution reach should help accelerate revenue growth. Further, input cost stabilization (VAM prices US$650-700/ton vs US$825/ton in Q1FY21) will help improve margins.

Outlook

We have revised our EPS estimates to Rs 17.7 (-19%) and Rs 23.7 (-13%) for FY21E and FY22E, respectively. We value the stock at 60x FY22E EPS to arrive at a TP of Rs1,419. Considering rich valuations, we maintain Reduce. Buy on Dips.

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