Accumulate Pidilite Industries Ltd For Target Rs.1,739 by Prabhudas Liladhar Capital Ltd
Positive demand outlook, expect steady returns
We increase EPS estimates for FY27/FY28 by 2.5%/9.5% led by 1) healthy demand outlook for C&B led by recovery in discretionary spending despite 2-12% price hike across segments 3) lesser than expected margin volatility, as VAM prices have seen a steep correction from the peak.
PIDI delivered a strong 1Q, led by robust 11.3% UVG in C&B, while EBITDA margin expanded by 110bps YoY, driven by operating leverage. We expect the strong operating momentum to sustain over the coming quarters; however, margin expansion could remain constrained given cyclical peak margins and volatile input costs. VAM prices are down ~50%+ from peak levels, with the benefit likely to flow through from Q3FY27 as high-cost inventory is expected to weigh on Q2 margins.
PIDI is well positioned to sustain growth, driven by continuous innovations, strategic tie-ups to introduce technologically advanced products, and 2–4x growth in pioneer and growth categories (50% of sales). Near-term margin outlook remains uncertain given volatile crude prices amidst ongoing geopolitical issues. We estimate 18.1% EPS CAGR over FY26–28 and assign a target price of Rs1739 (Rs1729 earlier) as we shift from DCF to 50xJune28 EPS. We expect steady returns and assign Accumulate rating
Consolidated Revenues grew by 21.3% YoY to Rs45.5bn(PLe: Rs43.9bn). Gross margins contracted by 66bps YoY to 53.5%.(Ple: 55%) amidst inflationary impact of west Asia war. EBITDA grew by 26.9% YoY to Rs11.9bn (PLe:Rs11.1bn); Margins expanded by 116bps YoY to 26.2% (PLe:25.3%). PBT grew by 28.3% YoY to Rs 11.8bn(PLe: Rs10.6bn). Adj PAT grew by 27.9% YoY to Rs8.7bn (PLe:Rs7.98bn)
Standalone Revenues grew by 22.1% YoY to Rs42.5bn(PLe: Rs40.88bn). Gross margins contracted by 90bps YoY to 52.6%.(Ple: 54%). EBITDA grew by 26.2% YoY to Rs11.2bn (PLe:Rs10.2bn); Margins expanded by 84bps YoY to 26.4% (PLe:25%). PBT grew by 27.3% YoY to Rs 11.2bn (PLe: Rs10bn) Adj PAT grew by 27.7% YoY to Rs8.3bn (PLe:Rs7.5bn)
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