Neutral Pidilite; target of Rs 1385: Motilal Oswal

Motilal Oswal 's research report on Pidilite

Faster growth in the ‘Growth’ and ‘Pioneer’ categories would lead to contribution from these categories increasing from around one-third of sales combined to around half of sales over the next three to four years. This would provide significant impetus to the topline over the medium term, something that has been lacking in recent years. Technology implementation in distribution in recent years is boosting efficiency and elevating distributor ROI, enabling the company to retain channel loyalty in the current uncertain times.

Outlook

We maintain a Neutral rating on the stock from a one-year perspective on account of fair valuations (58.5x FY22 EPS) and uncertain near-term recovery, especially in the B2B part of the business (~15% of sales). However, initiatives to grow the Growth and Pioneer categories could go a long way in revitalizing medium-term sales and earnings growth, which have dropped significantly in the past four years. These metrics reported an 8–10% CAGR over the past four years v/s ~16% and ~20%, respectively, in the first six years of the decade.

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