Prabhudas Lilladher's research report on Pidilite Industries
We are retaining Hold rating on PIDI and estimate 37% EPS CAGR over FY23- 25 given 1) soft VAM prices USD1100/ton which will enable 850bps gross margin expansion over FY23-25 2) demand green shoots in rural India and 3) expected pick up in premiumisation on hopes of moderation in prices. Long term demand trends remain favorable with 1) pick up in real estate, infra, repair & renovation activity 2) sustained launch of innovations across segments 3) targeted increase in ratio of Pioneer and Growth categories from current 33% to 50% over next 3 years and 4) gains from deeper distribution reach in rural India and small towns.
Outlook
We rollover and assign a DCF based target price of Rs2589 (Rs2500 earlier). We expect steady returns given PE of 51.9xFY25 EPS. Higher than expected growth and margins can provide upside risk to our estimates. Retain Hold.
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