Pidilite Industries Q1 Results Review - Inline Performance; Margin Outlook Improves: Motilal Oswal

Motilal Oswal Report

Pidilite Industries Ltd.’s Q1 FY24 performance was in line, due to healthy volume expansion. The domestic consumer and bazaar business clocked a sharp volume growth of 12% YoY. Meanwhile, the business-to-business segment posted a single-digit decline mainly due to lower exports and weaker demand from export-focused sectors.

Pidilite Industries' key raw material, vinyl acetate monomer, continued to decline materially to ~$1,150/tonne from $2,250/tonne in Q1 FY23. Consequently, the gross profit margin expanded 730 bp YoY/220 bp QoQ in Q1 FY24.

However, the company’s advertising and promotion spends rose to 3.6% of sales (from 2.1% in Q1 FY23). As a result, Ebitda margin expanded to 450 bp YoY to 21.6% in Q1 FY24.

Management indicated a double-digit growth in both urban and rural markets. Rural market has outpaced urban consistently. Although the sharp reduction in raw material cost could lead to healthy earnings growth over FY23-FY25, expensive valuations compel us to reiterate our 'Neutral' rating on the stock.

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