Pidilite Industries Q3 Results Review - Strong Growth Visibility; Upgrade To 'Accumulate': Prabhudas Lilladher

Prabhudas Lilladher Report

We cut our FY25/26 earnings per share estimates by 2.7%/4.2% as Pidilite Industries Ltd. will have just 60 basis points margin expansion and double digit topline growth in a volume growth and innovation led strategy.

Pidilite continues to grow strongly in tier III/rural ahead of urban by increasing distribution and awareness of its products. The company has taken high single-digit price cut since March23 (~6% in Q3 FY24) to sustained volume growth and ward of competition.

Pidilite aims at growing at 1.5 times gross domestic product growth in volumes led by-

1. rising construction activity and government capex,

2. rising share of growth and pioneer categories (45% of sales now),

3. sustained innovation across segments and

4. gains from deeper distribution reach/awareness and usage in all emerging construction aids.

We estimate 25% earnings per share compound annual growth rate over FY23-26 and assign discounted cash flow based target price of Rs 2704 (Rs 2704 earlier).

Although we expect moderate returns in near term given premium valuations (51.2 times FY26 EPS), we upgrade the stock to 'Accumulate'.

We believe Pidilite provides a better medium term opportunity than Asian Paints Ltd.

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