Accumulate Pidilite Industries Ltd for the Target Rs 1,600 by Prabhudas Liladhar Ltd
Strong growth outlook, margin volatility likely
We retain our positive stance on PIDI given steadily improving trajectory of volume growth and rising share of innovation in sales despite Volatile RM/margin environment in near term. Demand scenario remains intact and emerging segments will continue to provide tailwind to growth.
PIDI delivered a mixed 2Q performance, with healthy 11.1% UVG in C&B, offset by a 352bps YoY contraction in EBITDA margin due to elevated input costs. While we expect sequential margin recovery in 3Q (usage of lower cost RM procured in 1Q), current trend in crude prices signals margin pressure in 4Q and volatile times. Demand remains resilient, with the 2Q momentum sustaining into 3Q across both B2B and C&B segments. VAM prices have rebounded ~34% from recent lows and remain elevated amid the ongoing Middle East crisis. We expect ~250 bps QoQ Gm expansion in Q3.
We believe PIDI is well positioned to sustain growth, driven by continuous innovation, strategic tie-ups to launch technologically advanced products, and 2–4x growth in pioneer and growth categories (~50% of sales). We estimate 16.5% EPS CAGR over FY27–29 and value the stock at 45x Sep’28 earnings, arriving at a TP of Rs1600 (Rs1739 earlier at 50x Jun’28 earnings). We expect steady returns with stock trading at 37.6xFY29 EPS. Retain Accumulate.
Consolidated Revenues grew by 20.9% YoY to Rs43bn (PLe: Rs42.6bn). Gross margins contracted by 648bps YoY to 48.6%. (Ple: 52%). EBITDA grew by 3.1% YoY to Rs8.8bn (PLe:Rs9.8bn); Margins contracted by 352bps YoY to 20.4% (PLe:23%). PBT grew by 5.3% YoY to Rs 8.3bn (PLe: Rs9.41bn) Adj PAT grew by 6.3% YoY to Rs6.2bn (PLe:Rs7bn). UVG came at 10.7%
Standalone Revenues grew by 21.5% YoY to Rs39.9bn (PLe: Rs39.77bn). Gross margins contracted by -719bps YoY to 47.3% (Ple: 51%). EBITDA grew by 0.5% YoY to Rs8.1bn (PLe:Rs9.4bn); Margins contracted by -424bps YoY to 20.3% (PLe:23.7%). PBT grew by 8% YoY to Rs 8.4bn (PLe: Rs9.2bn) Adj PAT grew by 10.4% YoY to Rs6.5bn (PLe:Rs6.9bn)
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SEBI Registration number is INH000000933
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