Pidilite Industries - Initiating Coverage Report

Pidilite Industries (PIDI) reported healthy revenue growth of 21.3% YoY, the highest in the last 16 quarters, driven by broad-based growth across the C&B and B2B businesses. Domestic revenue grew 22.1% YoY, supported by robust UVG of 11.3%, calibrated price hikes to offset higher input costs and healthy demand across urban and rurban markets. The B2B and C&B businesses reported volume growth of 7.3% and 12.2%, respectively. PIDI expects healthy double-digit growth momentum to continue in FY27E. GM contracted to 53.5% due to higher input costs, primarily driven by the West Asia crisis. However, EBITDAM expanded to 26.2%, the highest in the last 22 quarters, supported by the carry-forward benefit of low-cost inventory, calibrated price hikes, and improved operating efficiency. The management reiterated its sustainable EBITDAM guidance of 20–24%, however, stable or softer RM prices could help it deliver the upper end of its EBITDAM guidance. PIDI has consistently delivered strong value and volume growth, while maintaining an EBITDAM of 23–24% over the past nine quarters, despite its guided range of 20–24%. We expect the company to sustain its strong performance, supported by its market leadership, strong brands, extensive distribution network, continuous innovation and healthy growth across core and emerging categories. Considering its rich valuation, we initiate coverage on PIDI with an 'Accumulate' rating. Valuing the stock at 58x FY28E EPS, we arrive at a target price of Rs 1,830. Buy on dips.

Pidilite Industries Ltd. (PIDILITIND) Stock Price Chart

Q1FY27 Performance:

Results ahead of consensus estimates: Net sales grew by 21.3% YoY to Rs 45.5bn led by strong UVG across categories. Domestic business reported 22.1% YoY revenue growth. GM contracted by 70bps YoY to 53.5%. A 70bps increase in RM cost was fully offset by 100/80bps decline in employee cost/other exps, resulted in EBITDA margin expansion of 120bps YoY to 26.2%. EBITDA grew by 26.9% YoY to Rs 11.9bn. APAT jumped by 27.9% YoY to Rs 8.7bn.

Segmental Performance:

C&B business remained the key growth driver, with revenue rising 22.5% YoY to Rs 34.6bn - the highest in the last 18 quarters - supported by robust UVG of 12.2% and strong demand across waterproofing, construction chemicals, joinery solutions, and adhesives. C&B EBIT grew 24.7% YoY to Rs 11.3bn, with margins expanding 60bps YoY to 32.6%. B2B business also delivered healthy performance, with revenue increasing 16.0% YoY to Rs 8.2bn, driven by sustained strength in the domestic project business (UVG of 10.4%), partially offset by weaker industrial product exports amid geopolitical challenges. B2B EBIT rising 29.2% YoY, resulting in a 210bps YoY margin expansion to 20.7%. The management remains confident of sustaining healthy growth momentum in both businesses going forward.

Outlook:

We expect PIDI to sustain healthy double-digit earnings growth over the medium term, supported by steady demand across consumer and B2B segments, continued market share gains, distribution expansion, product innovation and premiumisation. Better sourcing of raw material, operating leverage and disciplined cost management are likely to support margin resilience, while ongoing investments in brand building, manufacturing capacity and adjacent categories should strengthen its long-term growth trajectory.

Valuation:

We forecast a Revenue/EBITDA/PAT CAGR of 13.5%/13.0%/13.7% over FY26–FY28E. We remain positive on its long-term growth prospects, supported by market leadership, continuous innovation, and structural opportunities in housing, infrastructure, and premiumization. Initiate coverage on PIDI with an 'Accumulate' rating. Valuing the stock at 58x FY28E EPS, we arrive at a TP of Rs 1,830. Buy on dips.

Company website: https://www.pidilite.com/

Click to download the full Pidilite Industries Q1FY27 Review Analysis

Analyst:

• Sachin Bobade - HOR, Institutional Equities
• Akshay Patel - Senior Research Associate, Institutional Equities

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Pidilite Industries Q1FY27 Results: Frequently Asked Questions Answered

How did Pidilite Industries perform in Q1FY27?

Pidilite reported net sales of ₹45.5 billion, up 21.3% year-on-year. EBITDA increased 26.9% to ₹11.9 billion, while adjusted profit after tax rose 27.9% to ₹8.7 billion.

What drove Pidilite’s revenue growth in Q1FY27?

Growth was supported by domestic revenue growth of 22.1%, volume growth across C&B and B2B businesses, and demand across adhesives, waterproofing, construction chemicals and joinery solutions.

What was Pidilite’s EBITDA margin in Q1FY27?

EBITDA margin expanded by 120 basis points year-on-year to 26.2%, supported by calibrated price increases, lower employee and other expenses, and operating efficiency. Gross margin declined 70 basis points to 53.5% due to higher input costs.

How did Pidilite’s C&B and B2B businesses perform?

C&B revenue increased 22.5% to ₹34.6 billion, with volume growth of 12.2%. B2B revenue grew 16.0% to ₹8.2 billion, supported by domestic project demand, while industrial product exports faced geopolitical challenges.

What is the target price and rating for Pidilite Industries?

The supplied research initiates coverage with an Accumulate rating and a target price of ₹1,830, based on 58 times estimated FY28 earnings per share. The stated upside is 10% relative to the report’s reference price.

What are the key risks and monitorables for Pidilite?

Key monitorables include raw material price movements, the impact of geopolitical developments on input costs and exports, gross-margin trends, and the sustainability of elevated EBITDA margins.

What is Pidilite’s margin guidance?

Management reiterated a sustainable EBITDA margin guidance range of 20%–24%. The supplied research notes that stable or softer raw material prices could support performance toward the upper end of this range.

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