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MOSL: PIDILITE INDUSTRIES (Neutral)-VAM costs drive EBITDA beat, demand revival hazy

Pidilite Industries: VAM costs drive EBITDA beat, demand revival hazy

(PIDI IN, Mkt Cap USD10.8b, CMP INR1522, TP INR1430, 6% Downside, Neutral)

 

• EBITDA and PAT came in significantly ahead of our estimates, led by lower VAM costs and lower-than-expected tax rates.
• While management aspires to go back to the erstwhile 15% top-line growth trajectory, the timing of demand revival still remains uncertain.
• Valuations of 54.8x FY21E and 47.9x FY22E EPS lead us to maintain our Neutral rating. 

Sales in-line, margins significantly above expectations

• Net sales increased 4.2% YoY to INR19.3b (our estimate: INR19b). EBITDA was up 37.5% YoY at INR4.6b (our estimate: INR3.8b). PBT grew 37.6% YoY to INR4.5b (our estimate: INR3.7b), while adj. PAT was up 58% YoY at INR3.4b (our estimate: INR2.6b).
• Standalone Consumer Bazaar (C&B) revenue was up 3.4% YoY at INR13.8b, with 2% growth in sales volume & mix. Segmental EBIT grew 25.4% YoY to INR4.5b, with the margin expanding by 570bp YoY to 32.7%. Consol. C&B revenue was up 3.1% YoY at INR16.5b, with EBIT growing 31.2% YoY to INR4.7b. Segmental EBIT margin expanded 610bp YoY to 28.6%.
• For 9MFY20, revenue/EBITDA/PAT was up 5.7%/17.5%/42.3% YoY.
• Subsidiary performance: Overseas subsidiaries revenue grew 10% YoY to INR1.5b in 3QFY20. EBITDA increased 172% YoY to INR85m, with the margin expanding 3,500bp YoY to 5.8%. Domestic subsidiaries revenue declined 3% YoY to INR1.8b. EBITDA grew 37.7% YoY to INR233m, with the margin expanding 390bp YoY to 13.3%.