Pidilite Industries dips 3%, hits six-month low on disappointing Q3 results

Shares of Pidilite Industries hit six-month low of Rs 2,300, falling 3.5 per cent on the BSE in Wednesday's intra-day trade, after the company reported 14.3 per cent year-on-year (YoY) decline in consolidated profit after tax (PAT) at Rs 308 crore, due to higher raw material and interest cost.

The stock of one of the leading manufacturer of adhesives, sealants and construction chemicals company was trading at its lowest level since July 27, 2022. In the past one week, it has declined 8 per cent, as compared to 1 per cent fall in the S&P BSE Sensex.

The company's consolidated revenue grew marginally by 5 per cent YoY at Rs 2,987 crore mainly led by consumer & bazaar (C&B) segment. Earnings before interest, taxes, depreciation, and amortization (ebitda) margin declined 272 bps YoY to 16.5 per cent due to lower gross margin and increase in employee expenses.

While input prices have moderated significantly, gross margins have only improved marginally over the last quarter, largely as a result of high-priced inventory. Ebitda margins are in-line with the previous quarters despite an increased investment in A&SP.

Despite uncertain global economic conditions, currency devaluation and inflation, International Subsidiaries reported moderate sales growth whilst Ebitda remained under pressure due to higher input costs and impact of currency depreciation, the company said.

Pidilite Industries said this quarter saw stability in key input prices and consumer pricing. The demand conditions in rural and semi urban area remain under strain. The recent significant input cost reductions, however, as well as increased construction activity along with governmental initiatives in capex and rural sector augurs well for the future, the company said.

ICICI Securities believe Pidilite's Q3FY23 print was weak due to high base effect as well as sharp fall in Ebitda margins. Delay in price hikes and usage of high-cost inventory has kept margins under check. Ebitda margin at 16.5 per cent is lower than the company's pre-Covid level range of 20-21 per cent.

"We believe stabilising raw material prices and subsiding high-cost inventory will help in margin recovery from Q4 onwards. We await management commentary on future demand outlook and sustainable Ebitda margin guidance," ICICI Securities said.