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Pidilite Industries (PIDI) 2QFY12 results were below our estimates with the company reporting adjusted PAT of
INR864m (v/s our estimate of INR1,009m). Standalone sales increased 20.5% to INR7.1b (v/s our estimate of
INR7.3b) backed by volume growth of 12-13% and realization increase of ~8%.
We estimate consumer and bazaar products volume growth of 14-15% and industrial products volume growth of
~9% in 2QFY12. Gross margins declined 420bp YoY and 120bp QoQ as VAM (vinyl acetate monomer) prices were
up 45-50% YoY.
Although PIDI increased prices of its flagship brand, Fevicol, by ~5%, towards the end of 1QFY12, it was insufficient
to cover input cost inflation. Savings in employee costs (down 20bp) and other expenditure (down 130bp) restricted
EBITDA margin decline to 280bp at 18.3%.
EBITDA grew 4.8% to INR1.3b. PBT increased 5.2% and adjusted PAT increased only 2.2% due to a 260bp rise in
the tax rate. International business reported 5% sales growth with EBITDA of INR5m v/s INR22m in 2QFY11.
Margins were under pressure in North America, the Middle East and Brazil and sales declined by 17% in the US.
Valuation and view: Cutting estimates 3-5%; maintain Buy
We are reducing FY12 and FY13 estimates by 3-5%, factoring in (1) lower margins due to higher input costs and (2)
increased cash balance due to a delay in the elastomers project. We are reducing our target price from INR193 to
INR179 (20x FY13E EPS + INR4/share for the international business). The stock trades at 23.9x FY12E EPS of INR7
and 19.2x FY13E EPS of INR8.8. Maintain Buy.
Pidilite Industries' (PIDI) 2QFY12 results were below our estimates, with PIDI reporting
adjusted PAT of INR864m (against our estimate of INR1,009m). Standalone sales
increased 20.5% to INR7.1b (against our estimate of INR7.3b), backed by volume
growth of 12-13% and realization increase of ~8%. We estimate consumer and bazaar
products volume growth of 14-15% and industrial products volume growth of ~9%.
Gross margins declined 420bp YoY and 120bp QoQ as VAM (vinyl acetate monomer)
prices were up 45-50% YoY. Although PIDI increased prices of its flagship brand,
Fevicol, by ~5%, towards the end of 1QFY12, it was insufficient to cover the input
cost inflation.
Savings in employee costs (down 20bp) and other expenditure (down 130bp) restricted
EBITDA margin decline to 280bp at 18.3%. EBITDA grew 4.8% to INR1.3b. PBT
increased 5.2% but adjusted PAT increased by only 2.2% due to a 260bp increase in
the tax rate.
International business sales grew 5% and EBITDA was INR5m v/s INR22m in
2QFY11. Margins were under pressure in North America, the Middle East and Brazil
and sales declined by 17% in the US.
PIDI indicated the appointment of a consultant and go-slow strategy in the completion
of its synthetic elastomers project in the backdrop of a volatile economic environment,
input costs and selling prices of finished products. We were modeling INR8/share as
value in our SOTP analysis but we now assign zero value.
The management seems to be confident of sustaining volume growth momentum.
However, a major slowdown in capex and industrial production can impact growth
with a lag. VAM prices are down ~20% from their peak and we expect PIDI to reap
the benefits from 2HFY12.
Standalone: Sales up 20.5%, margins down due to higher input costs; PIDI
to benefit from 20% decline in VAM prices in 2HFY12
Standalone sales increased 20.5% to INR7.1b (against our estimate of INR7.3b),
backed by volume growth of 12-13% and increased realization of ~8%. We estimate
consumer and bazaar products volume growth of 14-15% and industrial products volume
growth of ~9%.
Gross margins declined 420bp YoY and 120bp QoQ as VAM prices were up 45-50%
YoY. Although PIDI increased prices by ~5% in its flagship brand, Fevicol, towards
the end of 1QFY12, the increase was insufficient to cover input cost inflation.
Savings in employee costs (down 20bp) and other expenditure (down 130bp) restricted
EBITDA margin decline to 280bp at 18.3%. EBITDA grew 4.8% to INR1.3b. PBT
increased 5.2% and adjusted PAT increased 2.2% due to a 260bp increase in tax rate.
The management indicated sustained volume growth. However, a major slowdown in
capex and industrial activity can impact volume growth in the coming quarters. VAM
prices have come off ~20% from their peak. This, along with the full impact of PIDI's
June price increase, should provide a cushion to margins.
Valuation and view: Cutting estimates 3-5%; maintain Buy
We are reducing our FY12 and FY13 estimates by 3-5% to factor in (1) lower margins
due to higher input costs, and (2) an increased cash balance due to the delay of the
elastomers project. We are reducing our target price from INR193 to INR179 (20x
FY13E EPS + INR4/share for the international business).
The stock trades at 23.9x FY12E EPS of INR7 and 19.2x FY13E EPS of INR8.8.
Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pidilite Industries (PIDI) 2QFY12 results were below our estimates with the company reporting adjusted PAT of
INR864m (v/s our estimate of INR1,009m). Standalone sales increased 20.5% to INR7.1b (v/s our estimate of
INR7.3b) backed by volume growth of 12-13% and realization increase of ~8%.
We estimate consumer and bazaar products volume growth of 14-15% and industrial products volume growth of
~9% in 2QFY12. Gross margins declined 420bp YoY and 120bp QoQ as VAM (vinyl acetate monomer) prices were
up 45-50% YoY.
Although PIDI increased prices of its flagship brand, Fevicol, by ~5%, towards the end of 1QFY12, it was insufficient
to cover input cost inflation. Savings in employee costs (down 20bp) and other expenditure (down 130bp) restricted
EBITDA margin decline to 280bp at 18.3%.
EBITDA grew 4.8% to INR1.3b. PBT increased 5.2% and adjusted PAT increased only 2.2% due to a 260bp rise in
the tax rate. International business reported 5% sales growth with EBITDA of INR5m v/s INR22m in 2QFY11.
Margins were under pressure in North America, the Middle East and Brazil and sales declined by 17% in the US.
Valuation and view: Cutting estimates 3-5%; maintain Buy
We are reducing FY12 and FY13 estimates by 3-5%, factoring in (1) lower margins due to higher input costs and (2)
increased cash balance due to a delay in the elastomers project. We are reducing our target price from INR193 to
INR179 (20x FY13E EPS + INR4/share for the international business). The stock trades at 23.9x FY12E EPS of INR7
and 19.2x FY13E EPS of INR8.8. Maintain Buy.
Pidilite Industries' (PIDI) 2QFY12 results were below our estimates, with PIDI reporting
adjusted PAT of INR864m (against our estimate of INR1,009m). Standalone sales
increased 20.5% to INR7.1b (against our estimate of INR7.3b), backed by volume
growth of 12-13% and realization increase of ~8%. We estimate consumer and bazaar
products volume growth of 14-15% and industrial products volume growth of ~9%.
Gross margins declined 420bp YoY and 120bp QoQ as VAM (vinyl acetate monomer)
prices were up 45-50% YoY. Although PIDI increased prices of its flagship brand,
Fevicol, by ~5%, towards the end of 1QFY12, it was insufficient to cover the input
cost inflation.
Savings in employee costs (down 20bp) and other expenditure (down 130bp) restricted
EBITDA margin decline to 280bp at 18.3%. EBITDA grew 4.8% to INR1.3b. PBT
increased 5.2% but adjusted PAT increased by only 2.2% due to a 260bp increase in
the tax rate.
International business sales grew 5% and EBITDA was INR5m v/s INR22m in
2QFY11. Margins were under pressure in North America, the Middle East and Brazil
and sales declined by 17% in the US.
PIDI indicated the appointment of a consultant and go-slow strategy in the completion
of its synthetic elastomers project in the backdrop of a volatile economic environment,
input costs and selling prices of finished products. We were modeling INR8/share as
value in our SOTP analysis but we now assign zero value.
The management seems to be confident of sustaining volume growth momentum.
However, a major slowdown in capex and industrial production can impact growth
with a lag. VAM prices are down ~20% from their peak and we expect PIDI to reap
the benefits from 2HFY12.
Standalone: Sales up 20.5%, margins down due to higher input costs; PIDI
to benefit from 20% decline in VAM prices in 2HFY12
Standalone sales increased 20.5% to INR7.1b (against our estimate of INR7.3b),
backed by volume growth of 12-13% and increased realization of ~8%. We estimate
consumer and bazaar products volume growth of 14-15% and industrial products volume
growth of ~9%.
Gross margins declined 420bp YoY and 120bp QoQ as VAM prices were up 45-50%
YoY. Although PIDI increased prices by ~5% in its flagship brand, Fevicol, towards
the end of 1QFY12, the increase was insufficient to cover input cost inflation.
Savings in employee costs (down 20bp) and other expenditure (down 130bp) restricted
EBITDA margin decline to 280bp at 18.3%. EBITDA grew 4.8% to INR1.3b. PBT
increased 5.2% and adjusted PAT increased 2.2% due to a 260bp increase in tax rate.
The management indicated sustained volume growth. However, a major slowdown in
capex and industrial activity can impact volume growth in the coming quarters. VAM
prices have come off ~20% from their peak. This, along with the full impact of PIDI's
June price increase, should provide a cushion to margins.
Valuation and view: Cutting estimates 3-5%; maintain Buy
We are reducing our FY12 and FY13 estimates by 3-5% to factor in (1) lower margins
due to higher input costs, and (2) an increased cash balance due to the delay of the
elastomers project. We are reducing our target price from INR193 to INR179 (20x
FY13E EPS + INR4/share for the international business).
The stock trades at 23.9x FY12E EPS of INR7 and 19.2x FY13E EPS of INR8.8.
Maintain Buy.
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