Pidilite Q3 Review: Shares Fall On Q3 Profit Miss, Analysts Flag FY24-25 Earnings

Shares of Pidilite Industries Ltd. fell after third-quarter profit declined and missed analysts' estimates.

The company's third-quarter net profit fell 15.2% to Rs 304.17 crore, according to a stock exchange filing. This is lower than Bloomberg's estimate of Rs 377.7 crore.

"While demand conditions in rural and semi-urban areas remain under strain, we are increasingly optimistic of the future," Managing Director Bharat Puri said in a release.

Pidilite Industries Q3 FY23 (Consolidated YoY)

• Revenue up 5% to Rs 2,997.59 crore (Bloomberg estimate: Rs 3,129.24 crore)

• Ebitda down 10% to Rs 495.86 crore (Bloomberg estimate: Rs 570.98 crore)

• Ebitda margin stood at 16.5% vs 19.3% (Bloomberg estimate: 18.2%)

• Net profit down 15.2% to Rs 304.17 crore (Bloomberg estimate: Rs 377.7 crore)

In March and Q1, "we will back to our normal margin range and focus will return on profitable volume growth," Puri told BQ Prime.

The company is seeing headwinds in demand in the rural and semi-urban, Puri said. These regions are a larger driver of growth for the company, he said.

In the fourth quarter, Pidilite will "definitely" see high single-digit or double digit volume growth, he added.

Shares of the company ended 2.81% lower compared with a 1.25% decline in the benchmark Nifty 50.

The total traded volume was 3.2 times its 30-day average volume. The relative strength index stood at 27, suggesting that the stock might be oversold.

Of the 20 analysts tracking the stock, four kept 'buy' call, six suggested a 'hold', while 10 analysts recommended 'sell', according to Bloomberg data. The 12-month consensus price target implied an upside of 8.8%.

Here's what analysts make of the Q3 earnings:

• Maintains 'underperform' with a target price Rs 2,200, implying a potential downside of 8.7%.

• Remains concerned on waterproofing growth.

• Concerned on FY24/FY25 earnings per share given competitive pressures from paint players.

• Likes the company's optimistic outlook for the future on the back of sharp reduction in input costs, increased construction activity, and government focus on capex and rural India.

• Pegs three-year sales CAGR lagging rival Asian Paints', high cost inventory-led gross margin miss and continued weak demand in rural and urban areas as negatives.

• Keeps a 'hold' rating with a target price of Rs 2,679 apiece.

• Expects high single-digit-volume decline in Industrials.

• Says margins appear to have bottomed out with priced inventory with 80bps gross margin expansion quarter-on-quarter.

• Expects impact of falling vinyl acetate monomer prices to be more visible in Q4 FY23.

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