Margin delight for Pidilite investors

livemint.com:

₹3,275.1 crore marginally missed consensus estimate of ₹3,384 crore. While domestic demand held up well, C&B product exports dipped due to subdued demand in the overseas market. The C&B segment is a major contributor to Pidilite’s revenues and the rest comes from B2B, which faced headwinds due to lower demand from business dependent on exports.

Management expects demand scenario in international markets like Nepal, Sri Lanka, and Bangladesh to improve in the next few months. With softening VAM prices the company’s earnings outlook is poised to improve. “Factoring in the margin expansion, we raise our FY24 and FY25 earnings per share estimates by 3% and 3.8%, respectively," said a Motilal Oswal Financial Services Ltd report.

VAM costs have fallen significantly, which should lead to healthy earnings growth despite relatively moderate sales growth prospects, it added. A fillip to earnings could aid investors sentiment. So far in 2023, Pidilite’s shares have been flat, underperforming the benchmark index Nifty50’s 7.3% returns.

Apart from cost inflation pressures, lingering worries about rising competition in the under-penetrated waterproofing segment with the entry of Asian Paints Ltd, also seem to be bothering investors. The waterproofing portfolio contributed 15-18% to Q1 sales, the management said. “Although the management is not too worried about the rising competitive pressure in the waterproofing sector, with a large paint company continuing to expand footprint with relatively lower priced products, developments here are monitorable," Aggarwal said.