About the Company

Pidilite is a consumer centric company committed to quality and innovation. For decades, they have been pioneering products for small to large applications, at home and industry, which have forged strong bonds with people from all walks of life. From adhesives, sealants, waterproofing solutions and construction chemicals to arts & crafts, industrial resins, polymers and more, their product portfolio is as diverse as it is ever-evolving. Today, their brands are trusted household and industrial names, and they are the market leader in adhesives. A robust and growing network makes their products accessible across demographics and geographies.

Q3 2019 Updates

Financial Results & Highlights

Standalone Financials
Particulars (INR Cr) Q3FY19 Q3FY18 YoY Q2FY19 QoQ
Revenues 1589.72 1375.77 15.55% 1517.97 4.73%
PBT 331.78 352.88 -5.98% 364.75 -9.04%
PAT 224.69 239 -5.99% 244.62 -8.15%
Consolidated Financials
Q3FY19 Q3FY18 YoY Q2FY19 QoQ
Revenues 1848.30 1542.90 19.79% 1757.44 5.17%
PBT 330.59 358.45 -7.77% 354.22 -6.67%
PAT 219.56 239.14 -8.19% 231.18 -5.03%


Detailed Results

    1. The Revenue has been up 15.55% YoY on standalone basis and 19.79% on consolidated basis which marks their 6th consecutive quarter with more than 10% revenue growth on YoY basis.
    2. PBT and PAT have declined 5.98% and 5.99% respectively emphasizing drop in margins.
    3. Sales volume has grown 10.8% YoY which was driven by growth of 13.4% in Consumer & Bazaar segment and a decline of 2.3% in Industrial Products segment.
    4. Material Costs are the main reason behind fall in margins with material costs as a % of sales increasing by more than 5.5%
    5. Overseas subsidiaries have also seen a decline with Pidilite USA seeing a decline of 18.5% YoY for the current quarter.
    6. Their Brazilian subsidiary also has declined around 5% YoY mainly due to competitive pricing pressures.
    7. Overall their overseas subsidiaries have stayed stagnant with only 1% growth on a YoY basis at Rs 136 Cr.
    8. On the other hand, Pidilite’s domestic subsidiaries have witnessed phenomenal growth of 88.6% to Rs 178 Cr. The EBITDA for these entities has also increased 41.2% to Rs 12.3 Cr this quarter.

Investor Conference Call Highlights

  1. Management maintains a stance of being cautiously optimistic as they foresee the input price pressures to ease in the near future.
  2. Management assures that the input prices will be passed on slowly to the consumer thus easing up and lifting margins in the near future.
  3. They are confident that decline in overseas market would not affect their overall revenues by a big margin.
  4. ILFS exposure has been reported at Rs 8.8 Cr for which the company has already made provisions to cover 50% of it.
  5. Management is optimistic that despite the fall in margins and profits, the increasing revenues and volumes signify increasing market share which is more important to them.
  6. Thus it can be said that management of Pidilite is maintaining a cautiously optimistic stance as mentioned earlier as they see the current quarter profit decline as a minor blip in the overall scheme of things as their main aim of revenue and volume growth is on track.

Analyst’s View

Pidilite remains a very strong and secular story for the Indian consumers. Fevicol, their star brand, is a household name across the country. While long term business prospects remain very strong, we believe the current valuation of the stock is too high to provide any margin of safety. However, we are closely tracking the business development and stock price action and would update as and when required.

Disclaimer

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