Pidilite Industries - Q4FY20 First Cut - ICICI Securities

(CMP: Rs. 1432; MCap: Rs. 72784 crore)

Pidilite's Q4FY20 performance was below our estimates in terms of revenue and PAT, which were largely impacted by lockdown and exceptional loss. However, the revenue and EBITDA was slightly better than our estimates if we exclude the impact of lockdown. Further, the company has re-organized its reporting segments and now Consumer & Bazaar (C&B) and Industrial Products have been regrouped, respectively to C&B and B2B segments.

Q4FY20 Earnings Summary

- Pidilite's consolidated revenue declined by ~6% YoY to ~Rs. 1545 crore largely impacted by lockdown and disruption in supply chain. The company has lost domestic revenue of Rs. 150 crore due to lockdown in the last 10 days of March'20. Excluding the lockdown impact, revenue would have grown by ~3% YoY at ~Rs. 1695 crore (I-direct estimate: Rs. 1689 crore). On the segment front, revenue from C&B and B2B segments declined by ~6% and ~3% YoY to Rs. 1124 crore and Rs. 441 crore respectively

- The gross margin during the period surged up by ~507 bps YoY (better than our estimate of +217 bps YoY) led by benign raw material prices. However, the sharp increase in gross margin was partially offset by higher employee cost and other expenditure which were up by ~100 bps and ~200 bps YoY (% of sales) respectively. As a result, EBITDA margin increased by ~250 bps YoY to 19.5% (I-direct estimate: 19.9%)

- Finally PAT declined by 35% YoY to ~Rs. 156 crore due to lower total income and exceptional loss of Rs. 33 crore (Vs I-direct estimate Rs. 258 crore). Exceptional item represents impairment loss on plant and machinery at Dahej Elastomer Project amounting to Rs. 33 crore for current quarter. Excluding exceptional items and tax write back in the base quarter, the PAT decline limited to 3% YoY

The quarter performance was significantly impacted by the lockdown on account of the pandemic as well as related disruptions in the supply chain. Pidilite reported a subdued top line, however EBITDA margin have improved substantially, primarily as a result of softer input costs. Further, while April'20 sales impacted by complete lockdown, the demand recovery witnessed in the month of May and June with opening up for business gradually with Rural markets witnessing a sharp recovery as against Urban markets. We believe, We believe there can be partial recovery in demand from 2HFY21 as normalcy returns and dealers start building inventories. Further, despite a lower operating leverage (due to lower plant utilisation) we believe margins would remain elevated owing to a sharp decline in raw material prices. We will come out with detailed report post Q4FY20 conference call.

Shares of PIDILITE INDUSTRIES LTD. was last trading in BSE at Rs.1432.4 as compared to the previous close of Rs. 1431. The total number of shares traded during the day was 34873 in over 3375 trades.

The stock hit an intraday high of Rs. 1473 and intraday low of 1428. The net turnover during the day was Rs. 50522753.

Source : Equity Bulls

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