Pidilite Industries Management meet: Less competitive pressures ::Anand Rathi

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Pidilite Industries
Management meet: Less competitive pressures
Pidilite’s management is upbeat about the start of the synthetic
elastomer project in FY13 and sees less competition ahead. It
also sees its construction and chemicals segment growing at
healthy rates. We retain a Buy.
 Synthetic elastomer project on track. Management indicated
that the synthetic elastomer project is progressing well. It expects
to complete installing the new plant and commence production by
2HFY13. With tax breaks at Dahej and port-proximity, Pidilite
expects strong export growth.
 Growing share of Dr. Fixit. Dr. Fixit faces little competition
from organised players. The construction and chemicals segment
enjoys healthy long-term revenue growth potential. Strong brandbuilding
activity, expansion of the distribution network and the
sub-segmentation strategy are driving revenues in this segment.
 Less competition helps retain pricing power. Pidilite’s
products have seen far less competitive pressure than others such
as soaps or shampoos. With no increase in major MNC or
domestic competitive pressure, we expect Pidilite to enjoy better
pricing power. In the past five quarters, it has hiked prices only
once in Jul ’11 (by 5%).
 Valuation and Risk. We value the stock at a DCF-based price
target of `196. (Implied target PE of 24x FY13e earnings). Key
risk: delay in commencing the synthetic elastomer project.