Adhesives maker Pidilite Industries Ltd reported stellar performance in the December quarter on key earnings parameters. Consolidated profit and revenue at Rs446 crore and Rs2,299 crore , respectively, exceeded analysts’ expectations. Volumes in its key consumer and bazaar business (C&B) grew 22% on year-on-year, while overall volumes improved by 19% y-o-y in the December quarter.
The company’s management said the volume and value growth of more than 20% in the C&B segment was driven by continued demand momentum in rural areas and strong recovery in urban, including metros. The management added that due to resurgence in industrial activity healthy volume growth has been registered in the Business to Business (B2B) segment, too. Further, the company’s overseas subsidiaries also reported strong double-digit constant currency revenue, as well as strong earnings growth, the management said.
Also Read | Covid vaccination faces slow start
Despite this stellar performance, the stock began Friday’s trading session on a weak note. The shares fell nearly 2% to Rs1,689 on the NSE in opening trade. Analysts said even though the overall stock market sentiment is currently downbeat, the weakness in the stock could partly be attributed to some company-specific concerns catching up with investors.
For instance, Pidilite’s impressive overall and C&B volumes growth comes on a low base of 2% and 3%, respectively. Analysts said even though Pidilite has been enjoying a near-monopoly and strong brand recall, in some of its product segments, it remains to be seen if volume growth sustains, now that competition is rising. Investors should note that leading paint companies have forayed into adjacent products, such as water proofing, where Pidilite has a large presence.
Pidilite’s consolidated gross margins and operating margins expanded by 100 basis points (bps) and 380bps, respectively, on a y-o-y basis in the December quarter. One basis point is one hundredth of a percentage point. Benign raw material cost and savings in employee costs aided margin expansion. But margins may come under threat from rising cost of key raw material vinyl acetate monomer.
The management acknowledged that profitability was higher due to the benefits of input costs and lower discretionary spends. However, with significant inflation in input costs, margins will be under pressure in the coming quarters, it added.
Recent Comments