22th August, 2023

Q1FY24 RESULT UPDATE

Retail Equity Research

Pidilite Industries Limited BUY
Specialty Chemicals 12 Months Investment Period Rating as per Large Cap
BSE CODE: 500331 NSE CODE: PIDILITIND CMP Rs. 2,487 TARGET Rs. 2,792 RETURN 12%
(Closing: 21-08-23)
Bloomberg CODE: PIDI:IN SENSEX: 65216

KEY CHANGES: TARGET RATING EARNINGS

Company Data
Demand trends indicate a positive outlook Market Cap (cr) Rs.126,382
Pidilite Industries Ltd (Pidilite) is a leading manufacturer of adhesives in Enterprise Value (cr) Rs.126,628
India. Its flagship brand is Fevicol. In Q1FY24, the consumer and bazaar Outstanding Shares (cr) 50.9
(C&B) segment accounted for ~81.2% of revenue and industrial products, Free Float 30.0%
for ~18.8%. Dividend Yield 0.4%
• Revenue grew 5.6% YoY to Rs. 3,275cr in Q1FY24, supported by volume 52 week high Rs.2,917
growth in the domestic C&B segment. 52 week low Rs.2,251
• EBITDA was Rs. 707cr and EBITDA margin expanded 450 bps YoY to 6m average volume 16,555
21.6%, due to decline in raw material costs and better operating Beta 0.5
efficiencies. Reported PAT grew 32.5% to Rs. 474cr. Face value Rs.1
• Performance in Q1FY24 was driven by volume growth in domestic C&B Shareholding % Q3FY23 Q4FY23 Q1FY24
business. The management stated that good monsoon, uptick in Promoters 69.9 69.9 69.9
construction activity, expansion in rural areas and moderate input FII’s 11.1 10.6 11.3
prices are expected to drive earnings performance in near term.
MFs/Insti 8.1 8.4 7.9
Additionally, the stock looks appealing at the current price level due to
Public 10.5 10.6 10.4
recent price corrections. Therefore, we upgrade our rating on the stock
Others 0.4 0.4 0.4
to BUY with a revised target price of Rs. 2,792 based on 66x FY25E
adjusted EPS. Total 100.0 100.0 100.0
• Promoters’ pledge 0.0 0.0 0.0
Domestic C&B business supports top line growth Price Performance 3 Month 6 Month 1 Year
Absolute Return -2.9% 6.2% -9.1%
Pidilite reported a revenue growth of 5.6% YoY to Rs. 3,275cr in Q1FY24, led by the
C&B segment (+9.2%). However, a 6.1% decline in the business-to-business (B2B) Absolute Sensex 5.7% 6.5% 7.7%
segment partially offset the top line growth. Growth in the C&B segment was mainly Relative Return* -8.6% -0.3% -16.8%
due to underlying volume growth of 11.7% YoY in the domestic market, led by double *over or under performance to benchmark index
digit growth in rural and urban markets. However, the segment’s exports declined
3,400 PIDILITIND Sensex Rebased
owing to weak demand abroad. B2B business revenue also declined due to weak
demand from export-oriented industries. The performance of international 3,100
subsidiaries was muted due to macroeconomic challenges in some countries. 2,800
Moderation in input prices, operational efficiencies drive margin 2,500
EBITDA grew a robust 33.5% YoY to Rs. 707cr in Q1FY24. EBITDA margin expanded 2,200
450 bps to 21.6%. This was mainly due to the softening of raw material prices and Aug-22 Nov-22 Feb-23 May-23 Aug-23
improvement in operating efficiencies. The management stated that material costs
declined sharply to ~$1,150/tonne in Q1FY24 from $2,250/tonne in Q1FY23. Consolidated (cr) FY23A FY24E FY25E
Reported PAT rose 32.5% to Rs. 474cr. Sales 11,799 13,146 14,701
Growth (%) 18.9 11.4 11.8
Key concall highlights EBITDA 1,984 2,768 3,154
• Management estimates the EBITDA margin to be in the range of 20-24% in FY24. EBITDA Margin (%) 16.8 21.1 21.5
• In Q1FY24, exports remained weak due to uncertain conditions in the US and Adj. PAT 1,273 1,850 2,151
Europe markets, Nepal and Bangladesh facing shortages of foreign exchange, and Growth (%) 6.8 45.3 16.3
many public holidays. Management expects better exports in Q2 and Q3FY24. Adj. EPS 25.0 36.4 42.3
• Advertising & sales expense as a percentage of other expenses was 3.6% in Growth (%) 6.8 45.3 16.3
Q1FY24 vs. 2.1% in Q1FY23. As the focus on brand building continues, the P/E 94.0 68.3 58.8
management expects this cost to remain high going forward.
P/B 16.6 15.3 13.4
Valuation EV/EBITDA 60.4 45.7 40.1
Performance in Q1FY24 was driven by volume growth in the domestic C&B business. ROE (%) 17.9 22.7 23.0
Pidilite’s management believes a good monsoon season, deeper expansion in rural D/E 0.0 0.0 0.0
areas, stable material costs, and an uptick in construction activity would support
earnings growth in the near term. The stock is currently available at attractive
valuations owing to recent price corrections. Therefore, we upgraded our rating on the
stock to BUY with a revised target price of Rs. 2,792 based on 66x FY25E adjusted EPS.

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Quarterly Financials (Consolidated)
Profit & Loss Account
Q1FY24 Q1FY23 YoY Growth % Q4FY23 QoQ Growth %
Revenue 3,275 3,101 5.6 2,689 21.8
EBITDA 707 529 33.5 459 54.0
EBITDA margins 21.6 17.1 450bps 17.1 450bps
Depreciation 73 61 19.7 76 (3.6)
EBIT 634 468 35.3 383 65.4
Interest 12 9 31.6 12 0.3
Other Income 23 11 119.4 23 2.7
Exceptional Items - - - - -
Share of profit from Associate (1) 3 (127.8) (1) 34.9
PBT 644 473 36.1 393 64.1
Tax 170 116 47.3 107 59.8
Reported PAT 474 358 32 286 66
Minority Interest 6 4 41.4 3 95.4
PAT att. to shareholders 468 354 32.4 283 65.4
Adjustments - - - - -
Adj. PAT 468 354 32.4 283 65.4
No. of shares 50.9 50.9 0.0 47.3 7.5
Adj. EPS (Rs.) 9.2 7.0 32.4 6.0 53.8

Change in Estimates
Old estimates New estimates Change %
Year / Rs. cr FY24E FY25E FY24E FY25E FY24E FY25E
Revenue 13,146 14,600 13,146 14,701 0 0.7
EBITDA 2,579 2,967 2,768 3,154 7.3 6.3
Margins (%) 19.6 20.3 21.1 21.5 144bps 113bps
Adj. PAT 1,695 1,983 1,850 2,151 9.1 8.5
Adj. EPS 33.3 39.0 36.4 42.3 9.1 8.5

Segment Revenue

Q1FY24 Q1FY23 YoY growth % Q4FY23 QoQ Growth %

Consumer & Bazaar Products 2,661 2,436 9.2 2,113 25.9

Business to Business 678 722 (6.1) 634 6.9
Others 22 26 (16.0) 21 4.8
Inter Segment Revenue (85) (82) (3.6) (78) (9.3)
Total Revenue 3,275 3,101 5.6 2,689 21.8

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PROFIT & LOSS BALANCE SHEET
Y.E December (Rs. cr) FY21A FY22A FY23A FY24E FY25E Y.E December (Rs. cr) FY21A FY22A FY23A FY24E FY25E
Revenue 7,293 9,921 11,799 13,146 14,701 Cash 443 352 310 404 521
% change (0.0) 36.0 18.9 11.4 11.8 Accounts Receivable 1,321 1,431 1,535 1,840 2,205
EBITDA 1,681 1,847 1,984 2,768 3,154 Inventories 1,234 1,695 1,817 2,242 2,677
% change 6.6 9.9 7.4 39.5 13.9 Other Cur. Assets 518 538 899 886 942
Depreciation 201 240 270 272 284 Investments 340 285 350 450 550
EBIT 1,480 1,608 1,715 2,496 2,870 Gross Fixed Assets 2,694 3,068 3,565 3,960 4,401
Interest 37 42 48 50 16 Net Fixed Assets 1,285 1,329 1,285 1,407 1,564
Other Income 80 48 56 57 58 CWIP 294 225 406 406 406
PBT 1,522 1,614 1,723 2,503 2,912 Intangible Assets 3,133 3,148 3,223 3,266 3,313
% change 3.6 6.0 6.8 45.3 16.3 Def. Tax (Net) 17 21 20 20 20
Tax 396 407 434 631 734 Other Assets 247 490 680 680 680
Tax Rate (%) 26.0 25.2 25.2 25.2 25.2 Total Assets 8,830 9,516 10,525 11,601 12,878
Reported PAT 1,126 1,207 1,289 1,872 2,178 Current Liabilities 2,233 2,039 2,247 2,253 2,287
PAT att. to common Provisions 58 72 80 80 80
1,131 1,208 1,273 1,850 2,151
shareholders
Debt Funds 308 403 353 363 373
Adj* 4 - - - -
Other Liabilities 398 398 398 398 398
Adj PAT 1,135 1,208 1,273 1,850 2,151
Equity Capital 51 51 51 51 51
% change (4.0) 6.8 6.8 45.3 16.3
Reserves & Surplus 5,542 6,353 7,161 8,199 9,405
No. of shares (cr) 50.9 50.8 50.8 50.8 50.8
Shareholder’s Fund 5,593 6,404 7,212 8,250 9,456
Adj EPS (Rs.) 22.3 23.8 25.0 36.4 42.3
Minority Interest 240 199 234 256 283
% change (4.1) 6.9 6.8 45.3 16.3
Total Liabilities 8,830 9,516 10,525 11,601 12,878
DPS (Rs.) 8.5 10.0 11.0 16.0 18.6
BVPS (Rs.) 110 126 142 162 186

CASH FLOW RATIOS

Y.E December (Rs. Y.E December FY21A FY22A FY23A FY24E FY25E
FY21A FY22A FY23A FY24E FY25E
cr) Profitab. & Return
Net inc. + Depn. 1,327 1,446 1,559 2,144 2,462 EBITDA margin (%) 23.0 18.6 16.8 21.1 21.5
Non-cash adj. 165 16 194 (41) (165) EBIT margin (%) 20.3 16.2 14.5 19.0 19.5
Changes in W.C (100) (507) (195) (713) (754) Net profit mgn.(%) 15.5 12.2 10.8 14.1 14.6
C.F. Operation 1,392 955 1,558 1,390 1,543 ROE (%) 20.1 18.8 17.9 22.7 23.0
Capital exp. (352) (374) (498) (394) (441) ROCE (%) 24.1 22.9 22.0 28.1 28.4
Change in inv. (1,354) (190) (407) (100) (50) W.C & Liquidity
Other invest.CF 18 6 6 - - Receivables (days) 66.1 52.6 47.5 51.1 54.8
C.F – Investment (1,688) (558) (899) (494) (491) Inventory (days) 133.4 113.6 98.1 116.6 124.1
Issue of equity (29) (39) 16 - - Payables (days) 108.8 70.3 57.4 56.2 52.2
Issue/repay debt 17 85 (81) 10 10 Current ratio (x) 1.4 1.7 1.9 2.2 2.6
Dividends paid (1) (432) (508) (812) (945) Quick ratio (x) 0.8 0.8 1.0 1.1 1.3
Other finance.CF (63) (82) (84) - - Turnover & Leverage
C.F – Finance (76) (468) (656) (802) (935) Gross asset T.O (x) 2.9 3.4 3.6 3.5 3.5
Chg. in cash (372) (71) 2 93 118 Total asset T.O (x) 0.9 1.1 1.2 1.2 1.2
Closing cash 443 352 310 404 521 Int. coverage ratio (x) 39.8 38.2 36.0 50.3 178.4
Adj. debt/equity (x) 0.1 0.1 0.0 0.0 0.0
Valuation
EV/Sales (x) 12.6 12.6 10.2 9.6 8.6
EV/EBITDA (x) 54.8 67.7 60.4 45.7 40.1
P/E (x) 81.1 103.3 94.0 68.3 58.8
P/BV (x) 16.5 19.5 16.6 15.3 13.4

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Recommendation Summary (Last 3 Years) Dates Rating Target
1-Feb-21 HOLD 1,847
3,600
19-May-21 BUY 2,131
3,000
17-Aug-21 HOLD 2,364
2,400 16-Nov-21 HOLD 2,562

1,800 4-Feb-22 HOLD 2,652

18-Aug-22 HOLD 2,841
1,200
16-May-23 HOLD 2,726
600 22-Aug-23 BUY 2,792
Aug-20 Feb-21 Aug-21 Feb-22 Aug-22 Feb-23 Aug-23
Source: Bloomberg, Geojit research

Investment Rating Criteria

Ratings Large caps Midcaps Small Caps
Buy Upside is above 10% Upside is above 15% Upside is above 20%
Accumulate - Upside is between 10%-15% Upside is between 10%-20%
Hold Upside is between 0% - 10% Upside is between 0%-10% Upside is between 0%-10%
Reduce/sell Downside is more than 0% Downside is more than 0% Downside is more than 0%
Not rated/Neutral

Definition:
Buy: Acquire at Current Market Price (CMP), with the target mentioned in the research note.
Accumulate: Partial buying or to accumulate as CMP dips in the future.
Hold: Hold the stock with the expected target mentioned in the note.
Reduce: Reduce your exposure to the stock due to limited upside.
Sell: Exit from the stock.
Not rated/Neutral: The analyst has no investment opinion on the stock.

To satisfy regulatory requirements, we attribute ‘Accumulate’ as Buy and ‘Reduce’ as Sell.

The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return
basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of
valuations/ return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded
to BUY or downgraded to a HOLD, REDUCE or SELL.

General Disclosures and Disclaimers

CERTIFICATION

I, ANIL R author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject
issuer or securities. This report has been prepared by the Research Team of Geojit Financial Services Limited, hereinafter referred to as Geojit.

COMPANY OVERVIEW
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independent evaluation of an investment in the securities of companies referred to in this report (including the merits and risks involved). The price,
volume and income of the investments referred to in this report may fluctuate and investors may realize losses that may exceed their original capital.
FUNDAMENTAL DISCLAIMER: We have prepared this report based on information believed to be reliable. The recommendations herein are based on 12
month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price
fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may
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REGULATORY DISCLOSURES: Group companies of Geojit Financial Services Limited are Geojit Technologies Private Limited (Software Solutions
provider), Geojit Credits Private Limited (NBFC), Geojit Investment Limited (financial Services Company (yet to start operations)), Geojit Techloan Private
Ltd( P2P lending (yet to start operations)), Geojit IFSC Ltd (a company incorporated under IFSC Regulations( yet to start operations)), Qurum Business
Group Geojit Securities LLC (a joint venture in Oman engaged in Financial Services), Barjeel Geojit Financial Services LLC (a joint venture in UAE engaged
in Financial Services), Aloula Geojit Capital Company (a joint venture in Saudi Arabia (Under Liquidation)) and BBK Geojit Securities Co. K.S.C.C (a subsidiary
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before making an investment decision:
1. Disclosures regarding Ownership:
GEOJIT confirms that:
It/its associates have no financial interest or any other material conflict in relation to the subject company (ies) covered herein.
It/its associates have no actual beneficial ownership of 1% or more in relation to the subject company (ies) covered herein.
Further, the Analyst confirms that:
(i) He, his associates and his relatives have no financial interest in the subject company (ies) covered herein, and they have no other material conflict in
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Digitally signed

ANIL R by ANIL R
Date: 2023.08.22
09:49:22 +05'30'

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