Fevicol maker Pidilite needs a quick fix to calm edgy investors
Pidilite Industries Ltd expects pain in the near-term. While announcing its March-quarter results, the company’s management cautioned about short-term softness in demand, surprising some analysts. Long-duration elections in the past have led to temporary logistics disruptions, and the present extreme heat conditions across the country could hamper demand, the management said.
This, coupled with a mixed set of fourth-quarter numbers, soured investors’ sentiment towards the stock of the adhesives and sealants maker, dragging its shares down by 4.5% on Wednesday. Among Pidilite's popular brands are brands include Fevicol, M-Seal and Dr. Fixit.
Pidilite’s March-quarter’s revenue missed analysts’ expectations, with year-on-year growth of around 8% lagging its double-digit volume growth. Pidilite did not take any price cuts in the fourth quarter, but it did pass on the benefits of lower input costs to consumers during the course of the financial year, the management said. Underlying volume growth (UVG) for Pidilite, at 15.2% in the fourth quarter, however, was robust.
The company’s key consumer and bazaar segment saw 12.7% UVG, and for its business-to-business segments, the reading was 25.2%. The double-digit growth in these segments was aided by distribution expansion, innovation, and supply chain and digital initiatives. Geographically, both urban and rural markets grew during the fourth quarter, with the latter outpacing the former.
Analysts, however, caution that if the value-volume gap persists for long due to price adjustments, it could hurt Pidilite’s earnings outlook. On the other hand, price hikes could be helpful. For now, the gross margin trend offers solace as it saw a solid year-on-year expansion, hitting a
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