Asia Pacific Research – July14,2023

Equity Research Report

Pidilite Industries Ltd
Stick Fevicol to Your Portfolio
About Company :
Pidilite Industries Limited is an Indian adhesives manufacturing Reco BUY
company based in Andheri (East), Mumbai. The company is the CMP Rs 2624
dominant and leading adhesives company in India. Pidilite also Target Price Rs 3000
manufactures products across verticals such as art materials and Potential Tareget 14.2%
stationery; food and fabric care; car products, adhesives, and
Stock data(as on July14,2023)
sealants; and speciality industrial products like adhesives,
Nifty 19564
pigments; textile resins, leather chemicals, and construction
52 Week H/L(in Rs) 2919 /2250
chemicals.
Market Cap(in Rs/USD mn) 133393/162
Outstanding Shares(mn) 508
Pidilite markets the Fevicol range of adhesives. Its other brands
Dividend Yeild(%) 0.42%
are FeviKwik, Dr. Fixit, Roff, Cyclo, Ranipal, Hobby Ideas, M-seal,
NSE Code PIDILITIND
and Acron. It also markets and manufactures WD-40 in India.
Nifty Pidlite
Executive Summary : 20000 3000

• During FY23, revenue grew by 18.9% driven by strong volume 19500

19000
2800

growth, improved product mix and price increases. The 18500

2600

growth across segments remained broad based. Further, 18000

17500
2400

international business witnessed modest growth. 17000

2200

• Going ahead, we believe Pidilite should be able to post

2000
16500

16000 1800

volume led profitable growth. During Q4FY23, the C&B Jul-22 Oct-22 Jan-23 Apr-23
business posted a revenue growth of 10% led by 7% volume
growth. However, B2B business performance was impacted 1M 3M 1Yr
due lower exports and lower demand from customers Absolute Return -1.30% 12.33% 19.83%
dependent on exports. Shareholding Pattern(March 31,2023)
• During the quarter, rural and semi urban grew faster Promoter 69.94%
compared to urban. Going ahead, strong demand growth is FII 10.61%
expected from rural and semi urban over next 3-6 months. DII 8.45%
• VAM consumption rate in Q4FY23 improved to USD 1,300/ton Public 10.98%
from USD 2,000/ton in Q3FY23. As VAM prices have sharply Others 0%
Financial Summary
corrected in the past few months and currently, stands at USD
Rs.(in Mn) FY23 FY24E FY25E
1,100/ton – Pidilite is expected to benefit from softening in
Net Sales 117991 133187 150737
RM prices, going ahead. Moreover, the company expects VAM
EBITDA 19844 2615 3074
prices to stabilize in USD 1,200/ton range.
EBITDA Margin(%) 16.8 19.6 20.4
• During the quarter, material cost % of revenue were lower
Net Profit 12889 1755 20904
320/500bps YoY/QoQ. The weightage average price hike for
EPS (Rs) 25.4 34.6 41.2
FY23 was 8-10%. Going ahead no further price hikes are
P/E(x) 97.4 71.5 60
required.
Price/book (x) 17.4 15 13.3
• GM expanded by 330bps YoY to 46.8% in Q4FY23 led by
Mcap/sales (x) 10.6 9.4 8.3
moderation in input cost. However, the benefits were invested
RoE (%) 17.9 20.9 22.1
in marketing initiatives which led to EBITDA margin expansion
RoCE (%) 21.5 25.3 26.9
of 110bps to 17.1%. Further, the company maintained
guidance of sustainable EBITDA margins of 20-24% Presented by: Premsingh Rajput
1
Guided by: CA Parth Verma
(The Valuation School)
Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Accelerating Innovation : • Gathered insights of changing
Consumer behaviour
• Multi-generation product
3 fully equipped roadmap based on Platform
in-house centres approach
in India • Nurturing Zero Harm Safety
culture at R&D

R&D
centres
R&D Team

• 150+ R&D scientists

with 2000+ years of
cumulative experience
232% increase 1 centre
in R&D spends overseas
since 2015
Source: Company Reports

Innovation disruptions :

Source: Company Reports

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Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Con-Call Q4FY2023 – Key Highlight
Financial Performance
•Consolidated revenue for FY22-23 increased by 18.9%
•Consolidated EBITDA increased by 7.4%
•Standalone revenues for Pidilite Industries Ltd. increased by 19.1%
•Consolidated margins decreased by 242 basis points due to input cost escalation
Dividends
•Board recommended a final dividend of Rs. 11 per share
New Products and Innovations
•Augmented coatings portfolio with Haisha range of products
•Forayed into decorative paints using existing sales force and distribution reach
•Has a range of new products and innovations in various divisions and geographies
Capex and Manufacturing Facilities
•Commissioned three plants in this calendar year
•Plans to commission another five before June 2023
•Upgrading manufacturing facilities to service market demand
Market Demand
•Expects growth in infrastructure and construction to enable volume-led profitable growth
•Domestic B2B demand is strong, but international B2B demand is uncertain
•Rural and semi-urban sales grew faster than urban sales in Q4
•Real estate and construction sectors are seeing an upsurge
Profitability
•Does not see any need for future price increases and will focus on profitable volume growth
•Expects to return to its normal range of 20% to 24% EBITDA margins this year
•Expansion into decorative paint segment being done selectively and from existing facilities, does
not expect significant impact on profitability
•Expects to benefit from decrease in VAM prices and anticipates gross margin expansion
Employee Incentives and Leadership
•Focused on building a ProNeurial culture and strong leadership bench
•Employee incentive structure reflects company's objectives and Pidilite way of working
•Sudhanshu Vats being gradually prepared to have a full view of Pidilite's operations and is
currently managing some businesses independently
Sales and Marketing
•Cross-sells products through master database, umbrella schemes, and incentivizing divisions to
sell products across divisions
•Invests in route-to-market, marketing, digital, innovation, and people to drive growth
•New product categories must have acceptable gross margin and meet benchmark IRR to be
considered for investment
•Sales bundling percentage varies by geography and town class, making it difficult to give a
standard answer
Industry Trends
•Paint companies still focus mainly on paint and large renovation segments
•Some paint companies have been trying to venture into the projects area, but this is not a recent
change and has been happening for the last three to four years
•El Nino tends to have a greater impact on morale than on hard sales, but there may be a slight
impact on rural and semi-urban sales 3
 Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Exhibit 1 : Growth trend in C&B business Exhibit 2 : Growth trend in B2B segment
(Mn) (Mn)

31968
120690

28419
106635

25796
94017

22783
77944

17968
17302

15754
58089
55739
54192

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY19 FY20 FY21 FY22 FY23 FY24E FY25E

Source: Company Reports

Exhibit 3 : Consolidated sales growth trend Exhibit 4 : EBITDA Trend

(Mn) (Mn)

19844
117991

18473
16806
99210

15760
14816

13682
72945

72927
70780
62188

FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23

Source: Company Reports

Exhibit 5 : Standalone Revenue & YoY Growth (%) Exhibit 6 : PAT Growth
(Mn) Standalone Revenue YoY Growth (%) (Mn)

30000 70%

25000 60%
12889
12068

50%
11288
11221
11064

20000
40%
9284

15000
30%
10000
20%
5000 10%
0 0%
Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY18 FY19 FY20 FY21 FY22 FY23

Source: Company Reports

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Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Exhibit 7 : Segmental Performance (Consolidated) :
Particulars Q4FY23 Q4FY22 YoY (%) Q3FY23 QoQ (%)
Revenue
B2C 21,128 19,132 10.4 24,216 -12.8
B2B 6,340 6,453 -1.8 5,999 5.7
Others 207 188 10.1 334 -38.1
Total 27,674 25,773 7.4 30,548 -9.4
EBIT
B2C 4,560 4,177 9.2 5,372 -15.1
B2B 707 444 59.3 391 80.8
Others 7 -8 - 39 -83.2
Total 5,273 4,613 14.3 5,803 -9.1
EBIT Margins (%)
B2C 21.6 21.8 -30 22.2 -60
B2C 11.2 6.9 430 6.5 460
Others 3.2 -4.4 - 11.8 -860
Total 19.1 17.9 120 19 10
Source: Company Reports, The Valuation School Research

Exhibit 8 : Overseas Performance :

Particulars Q4FY23 Q4FY22 YoY (%) Q3FY23 QoQ (%)
Revenue
Asia 809 825 -1.9 748 8.2
Middle East & Africa 710 554 28.2 639 11.1
Americas 585 536 9.1 611 -4.3
Total 2,104 1,915 9.9 1,998 5.3
EBITDA
Asia 122 91 34.1 100 22
Middle East & Africa -5 -14 NM 18 NM
Americas -42 -24 NM -22 NM
Total 75 53 41.5 96 -21.9
EBITDA Margin (%)
Asia 15.1 11 410 13.4 170
Middle East & Africa -0.7 -2.5 NM 2.8 NM
Americas -7.2 -4.5 NM -3.6 NM
Total 3.6 2.8 80 4.8 -120
Source: Company Reports, The Valuation School Research
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Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Exhibit 9 : Quarterly Snapshots :
Particulars Q4FY23 Q4FY22 YoY (%) Q3FY23 QoQ (%)
Revenue 26,893 25,071 7.3 29,976 -10.3
Total Expenses 22,301 21,060 5.9 25,017 -10.9
EBITDA 4,592 4,011 14.5 4,959 -7.4
Depreciation 762 622 22.5 686 11
EBIT 3,830 3,389 13 4,272 -10.4
Other Income 228 111 105.4 51 344.8
Interest 118 94 26.6 151 -21.5
EBT 3,940 3,407 15.7 4,173 -5.6
Tax 1,067 915 16.5 1,111 -4
PAT 2,860 2,544 12.4 3,078 -7.1
Gross Margin (%) 46.8 43.5 328 41.8 495
EBITDA Margin (%) 17.1 16 108 16.5 53
NPM Margin (%) 10.6 10.1 49 10.3 36
Tax Rate (%) 27.1 26.9 21 26.6 44
EBIT Margin (%) 14.2 13.5 72 14.3 -1
Source: Company Reports, The Valuation School Research
Exhibit 10: Yearly Snapshots :
Particulars (Rs Mn) FY22A FY23A FY24E FY25E
Revenue 99,210 1,17,991 1,33,099 1,48,858
Total Expense 80,737 98,147 1,07,281 1,18,665
COGS 54,442 67,594 67,725 74,340
Employees Cost 11,124 12,456 14,876 16,568
Other Expense 15,171 18,097 24,679 27,757
EBIDTA 18,473 19,844 25,818 30,193
Depreciation 2,396 2,697 2,224 2,354
EBIT 16,077 17,146 23,594 27,839
Interest 421 476 470 490
Other Income 363 496 1,115 1,386
Exc./E.0. iteams 0 0 0 0
EBT 16,019 17,166 24,238 28,735
Tax 4,070 4,344 6,302 7,471
PAT 12,076 12,889 17,996 21,329
Source: Company Reports, The Valuation School Research 6
Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Exhibit 11 : Key Ratios :
Particulars FY22A FY23A FY24E FY25E
Margins (%)
Gross Profit Margin 45.1 42.7 49.1 50.1
EBITDA Margin 18.6 16.8 19.4 20.3
EBIT Margin 16.2 14.5 17.7 18.7
Tax Rate 25.4 25.3 26 26
Net Profit Margin 12.2 10.9 13.5 14.3
As Percentage of Net Sales (%)
COGS 54.9 57.3 50.9 49.9
Employee 11.2 10.6 11.2 11.1
other 15.3 15.3 18.5 18.6
Measure of Fiancial status
Gross Debt/Equity 0.1 0.1 0 0
Interest Coverage 38.2 36 50.2 56.8
Inventory days 62 56 62 62
Debtors days 53 47 53 53
Average Cost of Debt 11.3 11.8 12 12.5
Payable days 39 33 24 24
Working Capital days 81 79 95 119
Fixed asset T/O 2.1 2.4 2.5 2.6
Measure of Investment
AEPS (Rs) 23.8 25.4 35.4 42
CEPS (Rs) 28.5 30.7 39.8 46.6
DPS (Rs) 8.5 10 7 7
Dividend Payout (%) 35.8 39.4 19.8 16.7
BVPS (Rs) 126 141.9 170.3 205.3
RoANW (%) 20.1 18.9 22.7 22.3
RoACE (%) 17.7 17 20.6 20.6
RoAIC (%) 24.4 22.9 27.7 29.2
Valuation Ratios
Mcap (Rs Mn) 12,56,143 12,56,143 12,56,143 12,56,143
MCap/Sales 12.7 10.6 9.4 8.4
EV 12,55,015 12,51,471 12,48,864 12,37,658
EV/Sales 12.7 10.6 9.4 8.3
EV/EBITDA 67.9 63.1 48.4 41
P/BV 19.6 17.4 14.5 12
Dividend Yield (%) 0.3 0.4 0.3 0.3
Growth Rate (%)
Revenue 36 18.9 12.8 11.8
EBITDA 9.9 7.4 30.1 16.9
EBIT 8.6 6.7 37.6 18
PBT 5.5 7.2 41.2 18.6
APAT 6.4 6.7 39.6 18.5
EPS 6.4 6.7 39.6 18.5
Source: Company Reports, The Valuation School Research 7
Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Exhibit 12:Peer Stock Performance:
Peer Stock Performance (1Yr)-Indexed

Jul-22 Oct-22 Jan-23 Apr-23

Pidilite SRF Linde Ind Solar Ind Gujarat Fluoroch

Exhibit 13: Peers Financial Performance:

Int Debt
No. Name CMP Mar Cap PEG P/E OPM % Debt ROCE ROE
Coverage /Eq

1 Pidilite Inds. 2623.5 133393.24 17.88 104.77 16.82 390.61 24.56 18.7 37.17 0.05

2 SRF 2187.5 64842.93 0.83 30.05 23.73 4477.53 22.37 22.84 14.76 0.43

3 Linde India 4339.5 37007.26 0.99 78.42 24.32 22.05 16.63 15.32 115.07 0.01

4 Solar Industries 3684.25 33338.8 1.57 44.15 18.62 1194.68 35.98 33.38 13.15 0.46
Gujarat
5 2764.05 30363.09 22.95 36.01 1515.13 29.6 27.07 16.28 0.27
Fluoroch
Source: Screener

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Asia Pacific Research – July14,2023

Pidilite Industries Ltd

Exhibit 14:Analyst Coverage Universe :
Sr no. Date Research House Rating PRICE AT RECO TARGET
1 16-May-23Geojit BNP Paribas Hold 2544 2726
2 10-May-23ICICI Direct Hold 2509 2535
3 10-May-23ICICI Securities Limited Accumulate 2509 2650
4 09-May-23Prabhudas Lilladhar Hold 2472 2589
5 09-May-23Motilal Oswal Neutral 2472 2340
6 27-Jan-23ICICI Direct Hold 2291 2535
7 27-Jan-23ICICI Securities Limited Accumulate 2315 2650
8 11-Nov-22ICICI Securities Limited Hold 2656 2655
9 11-Nov-22ICICI Direct Hold 2661 2695
10 10-Nov-22BOB Capital Markets Ltd. Sell 2661 2380
11 10-Nov-22Prabhudas Lilladhar Hold 2661 2737
12 09-Sep-22ICICI Direct Hold 2902 3010
13 18-Aug-22Geojit BNP Paribas Hold 2671 2841
14 12-Aug-22ICICI Securities Limited Hold 2641 2504
15 11-Aug-22Prabhudas Lilladhar Hold 2623 2673
16 11-Aug-22Motilal Oswal Neutral 2623 2440
17 11-Aug-22BOB Capital Markets Ltd. Sell 2623 1870
18 21-May-22Sharekhan Buy 2164 2550
19 20-May-22ICICI Direct Hold 2139 2000
20 19-May-22BOB Capital Markets Ltd. Sell 2139 1870
Source: Trendlyne

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This information/document does not constitute an offer to sell or solicitation for the purchase or sale of any financial
instrument or as an official confirmation of any transaction. The information contained herein is obtained from publicly
available data or other sources believed to be reliable and the Author has not independently verified the accuracy and
completeness of the said data and hence it should not be relied upon as such.

Author is not SEBI registered investment analyst. This document is prepared as part of academic project.

Investment in securities market are subject to market risks, read all the related documents carefully before investing. The
securities quoted are for illustration only and are not recommendatory. Registration granted by SEBI, and certification from
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