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Pidilite Industries (PIDI) reported consolidated revenue growth of 7.3% YoY (4- year CAGR of 13.2%) driven by 10.4% YoY growth in the consumer & bazaar (C&B) segment while revenue for industrial products (B2B) segment declined 1.8% YoY. Standalone C&B segment witnessed volume growth of 7% YoY. Consolidated operating margin expanded 108bps/53bps YoY/QoQ as raw material pressures eased (gross margin up 328bps/495bps YoY/QoQ) resulting in EBITDA/APAT growth of 14.5%/11.3% YoY, respectively. With raw material prices still remaining subdued, operating margins are expected to improve going ahead and the management has guided it to be in the historical range of 20-24% in FY24. During Q4, growth in C&B was hampered ~2%-3% due to change in Araldite distribution model, while its B2B segment experienced demand headwinds in the export markets. PIDI has forayed into decorative paints and has launched the product in 3 states of Telangana, Andhra Pradesh and Odisha to complete its portfolio of paint products (as it was already was present in 2/3rd of the paint portfolio). Management has not shared the detail plans of this segment but indicated it has adequate manufacturing plants and distribution network to ramp -up its sales in this segment. We believe PIDI has the wherewithal to be a prominent player in the paint industry led by its strong distribution and brand, and management post testing the waters may grow this business substantially over the next 3-4 years. We broadly maintain our estimates and ADD rating on the stock with an unchanged Mar’24E target price of Rs2,650.

* Modest revenue growth of 7.3% YoY: PIDI reported consolidated revenue growth of 7.3% YoY (-10.3% QoQ; 4-year CAGR of 13.2%) as C&B segment grew 10.4% YoY (-12.8% QoQ) while the B2B segment declined 1.8% YoY (+5.7% QoQ). Overseas subsidiaries reported revenue growth of 13% YoY (Asia grew 12.0% YoY, Middle East and Africa 28.4% YoY, Americas flat YoY), while domestic subsidiaries’ revenue grew 9.6% YoY. Standalone revenue increased 6.8% YoY (4-year CAGR of 14.7%) with volume growth of 7% YoY in C&B. Management stated demand from rural and semi-urban regions grew faster than urban region in Q4, but was uncertain of its sustainability going forward. It also indicated headwinds in export oriented sectors which may impact near-term sales. However, the management maintained its target to deliver double-digit volume growth over the medium-term with continued launch of innovative products.

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