MOSL: PIDILITE INDUSTRIES (Buy)-Sustained robust volumes-input cost pressures to moderate sequentially
Pidilite Industries: Sustained robust volumes; input cost pressures to moderate sequentially
(PIDI IN, Mkt Cap USD7.9b, CMP INR1110, TP INR1280, 15% Upside, Buy)
- Pidilite's (PIDI) consolidated net sales grew 19.8% YoY to INR 18.5b (est. INR16.8b) in 3QFY19. Standalone Consumer & Bazaar segment revenues were up 17.3% YoY to INR13.4b with underlying sales volume and mix growth of 13%, while EBIT margins contracted 500bp to 26.9%. Overall standalone underlying sales volumes and mix grew 11% YoY.
- Consolidated Consumer & Bazaar segment revenues were up 22.1% YoY to INR16b with EBIT margins down ~570bp YoY to 22.4%. Industrial segment grew by 6% to INR2.6b with margins down 510bp to 11.8%.
- 9MFY19 performance: Sales/EBITDA grew 18.2%/ 1.5%, while Adj. PAT declined 3.4% YoY. EBITDA margin contracted by 330bp YoY to 19.9%.
- Concall highlights: (1) PIDI has taken a price increase of 1.5-2% in 3QFY19, and thus, the company expects gross margins to return to normal levels from 4QFY19. (2) Current spot price of VAM is below USD1,000 as compared to VAM consumption costs of over USD1,300 in 3QFY19.
Pidilite Industries is engaged in the manufacturing and selling of consumer and bazaar products and speciality industrial chemical. Co.'s business is divided into three major segments: consumer & bazaar products, industrial products and other segments. Consumer & bazaar products consist of mainly adhesives, sealants, art materials and construction chemicals. Industrial products consists of organic pigments, industrial resins and industrial adhesives. Other segments consist of VAM manufacturing unit of Vinyl Chemicals (India) Ltd.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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