Multi Bagger - Pidilite Industries Ltd
UAE Exchange Etrade
NSE ID : PIDILITIND
CMP:- Rs.206/-
Pidilite Industries Ltd. has been a pioneer in consumer and specialties chemicals in India. Over two-third of the company's sales come from products and segments it has pioneered in India.
The company has posted excellent numbers for the quarter ending June 2012. A fair growth of about 18% in the revenue at Rs.1002.59 crore was reported in the June 2012 quarter as compared to Rs.849.23 crore during year-ago period. It managed to touch Rs.1,000 crore mark. Operating profit came at Rs.189 crore which translates to a y-o-y growth of 23.16%. The company took about 4%-5% price increases. Net profit skyrocketed 22.38% at Rs.128 crore as compared to Rs.104.61 crore y-o-y; even when the tax rate went up significantly because of the completion of the fifth unit in Himachal which completed its first five year tax holiday period. EPS stood at Rs.2.52. Margins too expanded sharply; operating profit margin expanded by 78bps at 18.85% and NPM surged 45bps at 12.77% on a y-o-y basis.
Material cost measured in terms of percentage to sales slipped sharply in Q1FY13. It stood at 50.52% as against 55.43% on a sequential basis. Employee cost was up by 16.5% over the same quarter last year largely because of the annual wage revision which got effected from 1st April as well as new hirers. Other expenditure was higher by 14.35% largely in the area of manufacturing and distribution cost. The non-operating income during the quarter has nearly doubled largely because of higher pool of investments in bank deposits and mutual fund.
With strong market position as a branded adhesive player and popular brands and wide distribution network; Pidilite Industries Ltd.; growth prospects looks promising. We believe PIL is trading at an attractive valuation at 26.24x and 20.93x of FY13EPS of Rs.7.64 and FY14EPS of Rs.9.58. We initiate a 'BUY' on the stock with a target price of Rs.260 (appreciation of about 30%) with the medium to long term investment horizon.