Pidilite Q2 Results Review - Resilient Volume Growth; Impressive Margin Expansion: Motilal Oswal

Motilal Oswal Report

In Q2 FY24, Pidilite Industries Ltd.’s performance was in line with our estimates. Volume growth was resilient at 8.2% despite monsoon-related disruptions. Consumer and bazaar segment revenue grew 3%, while business-to-business segment revenue declined 1% due to price adjustments and lower demand from export markets and export-oriented industries.

Prices of its key raw material, vinyl acetate monomer, continued to decline materially to ~$1,000/tonne from $2,500/tonne in Q2 FY23. Consequently, gross profit margin expanded sequentially and yearly. However, the company’s advertising and promotion spending doubled YoY during the quarter.

Pidilite has set up a lending business to provide small retail loans to its domain ecosystem. In the next two years, Pidilite plans to invest up to Rs 1 billion in the new business through a balanced mix of equity and debt in staggered tranches.

The management indicated that rural growth remained higher than urban growth. Although a sharp reduction in raw material costs could lead to healthy earnings growth over FY23-FY25, expensive valuations compel us to reiterate our 'Neutral' rating on the stock.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.