Pidilite Industries - Margins to Spurt; Result Update Q3FY15 :: Edelweiss, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Pidilite Industries’ (Pidilite) Q3FY15 revenue and PAT came in line with our expectation. The consumer and bazaar (C&B) business posted 13% YoY growth (slowest in past few years) with 8% YoY volume growth (still impressive when compared to volume growth of paint/lighting companies in Q3FY15). Volumes were impacted by weak demand (higher number of holidays in October). Industrial business reported subdued 5.2% YoY growth (slowest in 6 quarters) with 8% YoY volume growth as some price cuts were passed on due to raw materials cooling off. EBITDA margin of C&B and industrial segment increased by 125bps and 298bps YoY, respectively. VAM prices have peaked out and Q4FY15 margins are expected to improve. We remain positive from long-term perspective in view of GDP recovery, benign raw material prices and low inflation.

VAM price peaks out; EBITDA margin improves

Standalone gross margin dipped by 66bps YoY, but improved by 93bps QoQ. EBITDA margin expanded by 126bps YoY, aided by 277bps YoY dip in other expenditure (phasing out of ad spends to Q4FY15 will see higher ad spends).

Q3FY15 conference call: Key highlights

Margin benefits will come in Q4FY15 with high-priced inventory exhausting in February post which average VAM price will be USD1,200 versus USD1,350 in Q3FY15. Q3FY15 saw price hike of 2-3% in December 2014 in white glue (two price hikes were taken prior to Q3FY15). The raw material index (comprises top-5 raw materials, which contribute ~50% of total COGS) declined by 4-5% from 120 to 115 for Pidilite. Rurban grew at double the rate at which urban sales grew. Rurban contributes 15% to total C&B business. International business saw constant currency growth of 10% YoY (reported sales growth at 15% YoY). Historically, Pidilite has rarely cut prices.

LINK
https://www.edelweiss.in/research/Pidilite-Industries--Margins-to-Spurt;-Result-Update-Q3FY15/28157.html