Pidilite Industries Q3 Preview: Ebitda Margin Likely To Rise On Better Gross Margin

Pidilite Industries Ltd. may witness an increase in its third quarter Ebitda margin over the previous year, mainly due to continued improvement in gross margin.

Ebitda margin of the maker of Fevicol is likely to rise to 22.9% in the October–December period according to Bloomberg consensus estimates.

• Revenue to rise 7.5% to Rs 3,221.5 crore.

• Ebitda to rise 48% to Rs 736.6 crore.

• Margin to expand to 22.9% vs 17%.

• Net profit to rise 39.4% to Rs 429.6 crore.

Kotak Institutional Equities expects 5.4% year-on year standalone revenue growth, led by 6% year-on-year growth in domestic consumer and bazaar sales volumes (versus 3.7%/8.4% in the second half).

It expects 3% YoY growth in the business-to-business segment (versus 3% decline in 2Q). Aggregate revenues of subsidiaries is expected to grow 2% YoY to factor in the ongoing headwinds in the international markets. Overall, consolidated revenue growth is expected at 5.1% YoY.

Vinyl Acetate Monomer spot prices were below $900 per metric tonne over the last two months of the third quarter, below the consumption cost of $1,000 in the second quarter of FY24.

Kotak Institutional Securities noted that consolidated gross margin will expand 65 basis points quarter-on-quarter (+1,010 bps YoY) led by further easing of VAM prices.

Given continued improvement in gross margin, it expects Pidilite's Ebitda margin to expand 75/630 basis points sequentially and over a year earlier, respectively, to 22.8%. This is within company's guidance range of 20-24%. The expansion in Ebitda margin is after factoring in higher employee costs due to staff recruitment in new plants and higher media intensity (27.5% YoY growth in other expenses).