1 26 July 2017 1QFY18 Results Update | Sector: Consumer Pidilite Industries
BSE SENSEX S&P CNX 32,382 10,021 CMP: INR805 TP: INR810 (+1%) Neutral
Motilal Oswal values your support in Results below expectation; expect normalcy from 3QFY18 the Asiamoney Brokers Poll 2017 for PIDI’s 1QFY18 results came in below expectations. Gross sales were down India Research, Sales and Trading 1.3% YoY to INR16.7b. Net sales declined 2.6% YoY (est. of flat growth) to team. We request your ballot. INR15.3b, with flattish volume growth (est. of flat growth) in the Consumer Bazaar segment. EBITDA was down 18.5% YoY (est. of -4% YoY) to INR3.2b,
while adj. PAT declined 16.7% YoY (est. of -6.1%) to INR2.3b. Gross margin contracted 60bp YoY to 51.7%, led by uptrend in key raw Bloomberg PIDI IN Equity Shares (m) 512.7 material costs. Staff costs increased 150bp YoY to 11.8%. Other expenses were M.Cap.(INRb)/(USDb) 427.6 / 6.6 up 200bp YoY to 18.9%, led by 39.6% increase in adspend due to timing 52-Week Range (INR) 837 / 569 difference between advertisement and promotion spends compared to 1, 6, 12 Rel. Per (%) -7/0/-5 1QFY17. EBITDA margin thus contracted 410bp YoY (est. of -150bp YoY) to 21%. Avg. Val, INR m/Vol m 385 Free float (%) 30.4 Consolidated segmental performance: Consumer Bazaar revenues were down 1.6% YoY to INR14.3b. Segmental EBIT margin shrunk sharply by 390bp YoY to Financials & Valuations (INR b) 23.0%. Consumer Bazaar EBIT declined 15.7% to INR3.3b. Industrial segment Y/E Mar 2017 2018E 2019E was flat at INR2.5b, with margin contraction of 360bp to 14.7%. Net Sales 56.2 62.4 72.4 Concall highlights: 1) No significant schemes launched in 1QFY18 to push stock. EBITDA 12.6 13.6 15.5 Provided certain amount of money to channel partners for loss on stock due to PAT 8.6 9.3 10.6 GST transition; accounted fully in other expenses in 1QFY18. 2) Company had EPS (INR) 16.7 18.1 20.6 Gr. (%) 6.7 7.9 14.0 taken price hikes in segments that were affected more by RM inflation; no BV/Sh (INR) 64.5 79.0 96.1 price hikes taken in bigger products like Fevicol and Fevikwik. 3) Company sees RoE (%) 28.2 25.2 23.5 reasonable pick-up in demand after 1st week of July. RoCE (%) 26.8 24.1 22.7 Valuation and view: We cut our EPS numbers by 2%/3% for FY18/FY19 to build P/E (x) 48.1 44.6 39.1 in the miss on revenue and margins. PIDI offers a high-quality discretionary EV/EBITDA (x) 32.0 29.4 25.3 play with strong competitive positioning, proven in-market excellence, and an
impeccable track record of generating long-term shareholder value over Estimate change multiple periods. While we admire the business franchise and long-term TP change growth prospects, fair valuations at 39x FY19E EPS lead us to maintain our Rating change
Neutral rating with a revised target price of INR810 (INR835 earlier, 38x FY19E EPS, 5% premium to three-year average). Consolidated - Quarterly Earning Model (INR Million) Y/E March FY17 FY18 FY17 FY18E FY18 Var. 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%) Net Sales 15,694 14,177 13,344 12,954 15,289 15,594 16,146 15,384 56,168 62,414 16,008 -4.5 YoY Change (%) 6.8 7.5 -0.3 4.9 -2.6 10.0 21.0 18.8 4.8 11.1 2.0 Total Expenditure 11,754 10,951 10,477 10,375 12,079 12,015 12,516 12,250 43,570 48,861 12,226 EBITDA 3,939 3,225 2,866 2,579 3,210 3,579 3,629 3,134 12,598 13,552 3,782 -15.1 Margins (%) 25.1 22.8 21.5 19.9 21.0 23.0 22.5 20.4 22.4 21.7 23.6 Depreciation 258 303 295 296 313 318 316 318 1,151 1,264 270 Interest 35 26 30 48 37 26 30 34 139 127 32 Other Income 241 324 272 286 432 275 272 279 1,123 1,259 193 PBT 3,887 3,209 2,814 2,520 3,292 3,510 3,556 3,061 12,430 13,419 3,672 -10.4 Tax 1,174 912 793 971 1,033 1,088 1,102 937 3,851 4,160 1,120 Rate (%) 30.2 28.4 28.2 38.5 31.4 31.0 31.0 30.6 31.0 31.0 30.5 Adj PAT 2,713 2,309 2,020 1,549 2,260 2,422 2,454 2,124 8,579 9,259 2,552 -11.5 YoY Change (%) 16.3 12.4 1.5 -7.5 -16.7 4.9 21.5 37.1 6.7 7.9 -6.1 Margins (%) 17.3 16.3 15.1 12.0 14.8 15.5 15.2 13.8 15.3 14.8 15.9 E: MOSL Estimates
Krishnan Sambamoorthy - Research analyst ([email protected]); +91 22 3982 5428 Vishal Punmiya - Research analyst ([email protected]); +91 22 3980 4261 Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Pidilite Industries
Key quarterly charts
Exhibit 1: Segmental Performance (Consolidated) Segmental 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 Consumer and Bazaar
Sales (INRm) 11,478 10,326 10,009 8,418 13,259 11,820 12,090 10,764 14,548 12,929 12,186 11,579 14,318 Sales Growth (%) 20.7 15.1 13.0 7.7 15.5 14.5 20.8 27.9 9.7 9.4 0.8 7.6 -1.6 EBIT (INRm) 2,474 2,009 1,905 1,269 3,421 2,984 2,935 2,519 3,915 3,072 2,943 2,651 3,300 % Contribution 95.1 88.7 89.5 83.4 91.3 88.9 89.2 85.0 89.6 87.7 90.2 87.1 90.1 EBIT Growth % 1.3 3.4 21.5 18.3 38.3 48.5 54.1 98.4 14.4 2.9 0.3 5.3 -15.7 EBIT margin % 21.6 19.5 19.0 15.1 25.8 25.2 24.3 23.4 26.9 23.8 24.1 22.9 23.0 Industrial Products
Sales (INR m) 2,169 2,327 2,039 2,157 2,359 2,270 2,262 2,510 2,480 2,388 2,181 2,541 2,485 Sales Growth (%) 16.4 7.7 5.2 -1.6 8.8 -2.5 10.9 16.4 5.2 5.2 -3.6 1.2 0.2 EBIT (INRm) 161 267 251 288 366 339 367 470 452 455 330 409 365 % Contribution 6.2 11.8 11.8 18.9 9.8 10.1 11.2 15.8 10.4 13.0 10.1 13.5 10.0 EBIT Growth % -16.0 8.2 38.8 56.9 127.4 26.9 46.4 63.1 23.6 34.1 -10.1 -12.8 -19.3 EBIT margin % 7.4 11.5 12.3 13.4 15.5 14.9 16.2 18.7 18.2 19.0 15.1 16.1 14.7
Source: Company, MOSL
Exhibit 2: Consol. sales declined 2.6% YoY Exhibit 3: Gross margins contracted 60bp YoY
Sales growth (%) Gross Margins (%)
55.3
21.6
19.6 53.5
53.2 18.4 53.1 18.1
52.3 51.8 51.7 51.6
14.7 14.0
12.5 12.1 11.3 49.1 9.4
5.3 5.1 6.8 7.5 4.9 48.0 46.6
44.6 45.1 42.9 43.9 44.1 44.2 (0.3) (2.6) 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 Source: Company, MOSL Source: Company, MOSL
Exhibit 4: Employee expenses up 150bp YoY… Exhibit 5: ...and other expenses were up by 200bp YoY
Employees Cost (%) Other Expenditure (%)
24.3 24.1
12.4
12.4
20.9
12.0 20.8 11.8
20.3 11.6
19.7
19.3
18.9 18.9
11.0 18.4 10.9
10.8
10.6 17.5 17.5 17.5 10.6 10.4 16.9 9.9 10.2 9.9 16.5 16.4 10.0 16.1 9.7 9.5 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 Source: Company, MOSL Source: Company, MOSL
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Pidilite Industries
Exhibit 6: EBITDA margins thus contracted 410bp YoY Exhibit 7: Consol. PAT declined 16.7% YoY
EBIDTA Margins (%) PAT Growth (%)
25.1
99.0 23.3
22.8 22.8
21.9 49.6
21.5
21.0
35.5 20.3 12.4 18.5
16.3 1.5 20.5 19.0 11.9 11.2 19.9
19.2 11.1
58.6 17.9
17.2 (7.5) 16.4 16.1 14.8 10.4 12.8 (2.7) (6.7) (16.7) 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 Source: Company, MOSL Source: Company, MOSL
Standalone performance for 1QFY18 Gross sales declined by a meager 0.2% YoY to INR14.9b. Net sales, EBITDA and adj. PAT declined 1.5%, 20.7% and 20.3%, respectively. Gross margin contracted by 240bp YoY to 51.1% and EBITDA margin by 550bp to 22.7%. Staff costs increased 120bp YoY to 10.7%, and other expenses were up 190bp YoY to 17.7%. Consumer Bazaar revenue declined 0.3% YoY. Consumer Bazaar segmental EBIT margin shrunk 560bp YoY to 25.6%. Consumer Bazaar EBIT declined 18.1% to INR3.2b.
Exhibit 8: Segmental Performance (Standalone) Segmental 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 Consumer and Bazaar
Sales (INRm) 10,169 9,135 8,803 7,668 11,597 10,259 10,442 9,248 12,528 10,916 10,237 9,924 12,489 Sales Growth (%) 20.8 15.9 12.5 9.7 14.0 12.3 18.6 20.6 8.0 6.4 -2.0 7.3 -0.3 EBIT (INRm) 2,413 1,997 1,893 1,373 3,287 2,831 2,884 2,334 3,908 2,998 2,927 2,592 3,199 % Contribution 95.0 88.7 89.5 84.4 91.0 88.3 89.0 84.0 89.6 87.4 90.1 86.9 89.8 EBIT Growth % -0.1 3.4 21.4 11.8 36.2 41.8 52.4 70.0 18.9 5.9 1.5 11.1 -18.1 EBIT margin % 23.7 21.9 21.5 17.9 28.3 27.6 27.6 25.2 31.2 27.5 28.6 26.1 25.6 Industrial Products
Sales (INR m) 2,169 2,327 2,039 2,157 2,359 2,270 2,262 2,510 2,480 2,388 2,181 2,541 2,485 Sales Growth (%) 16.4 7.7 5.2 -1.6 8.8 -2.5 10.9 16.4 5.2 5.2 -3.6 1.2 0.2 EBIT (INRm) 161 267 251 288 366 339 367 470 452 455 330 409 365 % Contribution 6.3 11.9 11.8 17.7 10.1 10.6 11.3 16.9 10.4 13.3 10.2 13.7 10.2 EBIT Growth % -16.0 8.2 38.8 56.9 127.4 26.9 46.4 63.1 23.6 34.1 -10.1 -12.8 -19.3 EBIT margin % 7.4 11.5 12.3 13.4 15.5 14.9 16.2 18.7 18.2 19.0 15.1 16.1 14.7
Source: Company, MOSL
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Pidilite Industries
Exhibit 9: Quarterly performance of Overseas Subsidiaries Sales (INR Mn) 1QFY17 1QFY18 Change (%) Pidilite USA Inc. 761 476 (37.4) Pulvitec do Brasil 219 199 (9.1) Pidilite Bangladesh 266 238 (10.7) Pidilite Industries Egypt SAE 39 69 77.0 Pidilite Bamco (Thailand) 112 106 (4.9) Pidilite MEA Chemicals LLC 197 182 (7.5) Pidilite Lanka Pvt Ltd 53 55 4.4 Others 20 22 9.0 Total 1,667 1,347 (19.1) EBITDA (INR Mn) 1QFY17 1QFY18 Change (%) Pidilite USA Inc. 62 22 (64.5) Pulvitec do Brasil -2 -1 (45.5) Pidilite Bangladesh 53 54 1.9 Pidilite Industries Egypt SAE 1 1 (53.8) Pidilite Bamco (Thailand) 15 4 (72.2) Pidilite MEA Chemicals LLC -43 -26 (41.1) Pidilite Lanka Pvt Ltd 2 0 (117.4) Others 4 70 1,747.4 Total 92 124 34.6 EBITDA Margin (%) 1QFY17 1QFY18 Change (%) Pidilite USA Inc. 8.2 4.6 (3.5) Pulvitec do Brasil -1.0 -0.6 0.4 Pidilite Bangladesh 20.0 22.8 2.8 Pidilite Industries Egypt SAE 3.3 0.9 (2.5) Pidilite Bamco (Thailand) 13.5 4.0 (9.6) Pidilite MEA Chemicals LLC -22.0 -14.0 8.0 Pidilite Lanka Pvt Ltd 4.4 -0.7 (5.1) Others 18.9 320.5 301.6 Total 5.5 9.2 3.7
*Note: 1QFY18 EBITDA includes sale of assets of Cyclo division (INR58.3m) Source: Company, MOSL
Exhibit 10: Quarterly performance of Domestic Subsidiaries Sales (INR Mn) 1QFY17 1QFY18 Change (%) Nina Waterproofing Systems Pvt. Ltd. 355 461 29.8 Percept Waterproofing Services Ltd. 90 121 34.7 ICA Pidilite Pvt. Ltd. 145 278 91.3 Others 127 162 27.6 Total 716 1,021 42.5 EBITDA (INR Mn) 1QFY17 1QFY18 Change (%) Nina Waterproofing Systems Pvt. Ltd. 40 49 23.0 Percept Waterproofing Services Ltd. 8 10 27.2 ICA Pidilite Pvt. Ltd. 21 5 (75.5) Others 15 16 5.4 Total 83 80 (4.3) EBITDA Margin (%) 1QFY17 1QFY18 Change (%) Nina Waterproofing Systems Pvt. Ltd. 11.2 10.6 (0.6) Percept Waterproofing Services Ltd. 9.1 8.5 (0.5) ICA Pidilite Pvt. Ltd. 14.3 1.8 (12.5) Others 11.7 9.7 (2.0) Total 11.6 7.8 (3.8)
Source: Company, MOSL
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Pidilite Industries
Pidilite conference call highlights
Performance Price hike taken in some products due to high RM prices. nd 1st price hike was taken in 4Q and 2 in May in some products. Price increase was not across the board; no change in bigger products like Fevicol and Fevikwik prices. For the first two months of 1QFY18, the company saw high-single-digit volume and value growth; June impacted by destocking by channel partners (mostly retailers). Reasonable pick-up after 1st week of July. No significant schemes done in 1QFY18 to push stocks. Provided certain amount of money to channel partners for loss on stock due to GST transition; accounted fully in other expenses in 1QFY18. Have passed on the benefits of tax reduction due to GST.
Segmental highlights Exports focus in Consumer Bazaar products will be in emerging markets (SEA, SAARC and Africa). Industrial exports focus will be in the US and Europe. Stationery is the largest category in Arts & Craft materials, followed by handicrafts/artisans and then Hobby color. Last year, the handicrafts/artisans segment saw competition from some small players. Joinery segment is increasing in India. Many small players; company has developed portfolio of products and separate route to market for this segment. Players like Henkel are present in this segment. th Wood-based adhesives would be less than 1/4 of company’s revenues.
GST Most of the direct distributors have moved to GST. Will take few more weeks for things to normalize for wholesaler and retailer. Distributor carries between 15- 25 days. Retailer carries 15-25 days; so total around 45 days.
Financials, material costs and guidance VAM prices increase QoQ; weighted avg. price in 4Q stood at USD 720, whereas in 1QFY18 it was USD920. VAM price movement depends on prices of oil, ethylene & acetic acid, as well as supply/demand situation globally. RM basket saw increase in some, while benefited in some raw materials because of strengthening of currency. PIDI’s RM index inflation was 4% YoY, which was partially mitigated by change in selling price. Will be judicious in pricing; will not pass on entire increase in raw material cost from low levels of last 2 years. Expects to spend more on advertisement (as a % of sales) going forward. Ad spends to be around 4% of net sales. Increase in ad spends not led by competition but by consumption opportunity. Will see some deterioration in GM from last 2 years’ levels. Running initiatives to optimize some fixed costs. No significant change in price premium to unorganized players. Continue to look for acquisition opportunity in India and outside. Company is very selective about it and evaluating certain targets. Acquisition in overseas markets will on stronger players in their respective markets. Capex: INR1.5b in FY18.
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Pidilite Industries
Valuation & view PIDI offers a high quality discretionary play with strong competitive positioning, proven in-market excellence and an impeccable track record of generating long term shareholder value over multiple periods. While we admire the business franchise and long term growth prospects, fair valuations at 39x FY19 EPS leads us to maintain our Neutral rating with a revised target price of INR 810 (INR 835 earlier, 38x FY19EPS, 5% premium to three year average).
Exhibit 11: We change our estimates by 2%/3% for FY18/FY19 respectively to build in miss on topline and margins New Old Change INR m FY18E FY19E FY18E FY19E FY18E FY19E Sales 62,414 72,397 63,711 73,877 -2.0 -2.0 EBITDA 13,552 15,458 14,070 16,117 -3.7 -4.1
PAT 9,259 10,555 9,458 10,854 -2.1 -2.8 Source: Company, MOSL
Exhibit 12: PIDI P/E (x): Sharp re-rating in last 12 months Exhibit 13: PIDI P/E premium vs. Sensex PE (x) Peak(x) Avg(x) Pidilite Inds. PE Relative to Sensex PE (%) 53.0 Median(x) Min(x) LPA (%) 150 124.9 42.3 42.0 41.0 100 52.2 29.0 26.6 50 26.6 17.0 0 7.8 5.0 -50 Jun-17 Jun-17 Jun-12 Jun-12 Jun-07 Jun-07 Sep-13 Sep-13 Sep-08 Sep-08 Dec-14 Dec-14 Dec-09 Dec-09 Mar-16 Mar-16 Mar-11 Mar-11 Source: Company, MOSL Source: Company, MOSL
Exhibit 14: Valuation Matrix Target Reco CMP Mkt Cap EPS Growth YoY (%) P/E (x) RoE (%) Div. (%) Price Company Upside (INR) (INR) (INR B) (USD B) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY17 (%) Consumer
Asian Paints Neutral 1,134 1,200 6 1,105 17.2 8.7 5.6 19.5 53.9 51.1 42.8 28.5 0.8 Britannia Inds. Buy 3,854 4,450 15 462 7.2 7.3 16.0 23.5 52.3 45.1 36.5 36.9 0.0 Colgate-Palm. Buy 1,066 1,335 25 291 4.5 -5.7 20.8 21.1 50.2 41.5 34.3 50.4 0.9 Dabur India Neutral 306 315 3 541 8.4 1.9 6.7 18.3 42.2 39.6 33.5 28.4 0.8 Emami Buy 1,113 1,265 14 251 3.9 4.5 6.6 20.0 41.9 39.4 32.8 35.8 0.8 Godrej Cons. Neutral 1,025 930 -9 679 10.6 12.4 15.4 14.6 54.2 47.0 41.0 24.6 0.6 GlaxoSmith C H L Sell 5,504 4,500 -18 231 3.6 0.9 6.5 9.3 35.3 33.1 30.3 22.2 1.0 Hind. Unilever Buy 1,164 1,285 10 2,487 38.6 1.9 16.8 19.2 59.3 50.7 42.6 65.6 1.5 ITC Neutral 293 280 -5 3,540 55.0 9.4 10.4 11.4 34.9 31.7 28.4 23.5 1.9 Jyothy Lab. Neutral 376 405 8 69 1.1 175.7 -20.4 22.4 33.5 42.0 34.3 21.1 1.6 Marico Neutral 326 360 10 428 6.6 12.1 10.5 21.1 51.9 47.0 38.8 36.7 0.9 Nestle India Sell 6,787 5,990 -12 657 10.2 -1.6 0.6 17.6 57.5 57.2 48.6 39.0 0.9 P & G Hygiene Buy 8,063 9,082 13 264 4.1 11.5 7.5 16.6 55.6 51.7 44.4 45.3 4.5 Page Industries Buy 16,786 19,125 14 186 2.9 15.0 32.8 26.2 70.3 52.9 42.0 40.0 0.5 Parag Milk Neutral 255 240 -6 21 0.3 -46.4 106.4 64.7 70.8 34.3 20.8 5.9 0.0 Pidilite Inds. Neutral 805 810 1 424 6.6 6.7 7.9 14.0 48.1 44.6 39.1 28.2 0.6 United Breweries Neutral 816 850 4 214 3.3 -23.0 11.6 51.9 93.9 84.1 55.4 10.4 0.1 United Spirits Neutral 2,572 2,525 -2 377 5.9 87.1 29.1 49.3 96.2 74.5 49.9 21.3 0.0 Retail
Jubilant Food. Sell 1,282 850 -34 85 1.3 -32.1 48.0 40.0 128.1 86.6 61.8 8.2 0.2
Titan Company Neutral 537 545 1 476 7.4 18.5 13.8 18.2 59.5 52.3 44.2 20.6 0.5 Source: Company, MOSL
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Pidilite Industries
Financials and Valuations
Income Statement (INR Million)
Y/E March FY15 FY16 FY17 FY18E FY19E FY20E Net Sales 48,783 53,612 56,168 62,414 72,397 83,978 Change (%) 13.0 9.9 4.8 11.1 16.0 16.0 Raw Materials 26,686 25,847 26,396 29,973 34,926 40,534 Gross Profit 22,097 27,765 29,772 32,440 37,471 43,443 Margin (%) 45.3 51.8 53.0 52.0 51.8 51.7 Operating Expenses 14,048 16,030 17,174 18,888 22,013 25,580 EBITDA 8,049 11,735 12,598 13,552 15,458 17,864 Change (%) 14.2 45.8 7.4 7.6 14.1 15.6 Margin (%) 16.5 21.9 22.4 21.7 21.4 21.3 Depreciation 1,178 1,005 1,151 1,264 1,416 1,633 Int. and Fin. Charges 156 133 139 127 127 127 Other Income 113 778 1,123 1,259 1,382 1,526 Profit before Taxes 6,828 11,376 12,430 13,419 15,297 17,630 Change (%) 10.3 66.6 9.3 8.0 14.0 15.2 Margin (%) 14.0 21.2 22.1 21.5 21.1 21.0 Tax 1,694 3,335 3,851 4,160 4,742 5,465 Tax Rate (%) 24.8 29.3 31.0 31.0 31.0 31.0 Adj PAT 5,134 8,040 8,579 9,259 10,555 12,164 Change (%) 13.2 56.6 6.7 7.9 14.0 15.2 Margin (%) 10.5 15.0 15.3 14.8 14.6 14.5
Balance Sheet (INR Million)
Y/E March FY15 FY16 FY17 FY18E FY19E FY20E Share Capital 513 513 513 513 513 513 Reserves 22,193 27,316 32,553 40,013 48,769 59,134 Net Worth 22,706 27,829 33,066 40,526 49,281 59,646 Loans 584 848 848 848 848 848 Deferred Liability 566 670 670 670 670 670 Minority Interest 51 427 427 427 427 427 Capital Employed 23,907 29,774 35,011 42,471 51,226 61,591
Gross Block 17,867 20,646 23,024 25,445 27,918 30,462 Less: Accum. Depn. 8,298 9,573 11,083 12,769 14,658 16,835 Net Fixed Assets 9,570 11,073 11,941 12,676 13,260 13,627 Capital WIP 4,618 4,001 4,001 4,001 4,001 4,001 Goodwill 215 239 239 239 239 239 Others 68 97 97 97 97 97 Investments 3,599 6,490 7,990 9,490 10,990 12,490 Curr. Assets, L&A 15,077 17,149 22,090 27,328 35,551 45,830 Inventory 6,410 6,290 7,605 8,536 9,904 11,490 Account Receivables 5,861 7,294 9,127 9,390 10,894 12,639 Cash and Bank Balance 860 1,319 2,495 6,254 11,271 17,827 Others 1,946 2,246 2,863 3,148 3,482 3,874 Curr. Liab. and Prov. 9,240 9,276 11,347 11,361 12,911 14,693 Account Payables 6,933 8,418 8,086 9,172 10,660 12,368 Provisions 2,308 858 3,261 2,189 2,251 2,325 Net Current Assets 5,837 7,873 10,743 15,967 22,639 31,137 Application of Funds 23,907 29,774 35,011 42,470 51,226 61,591 E: MOSL Estimates
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Pidilite Industries
Financials and Valuations
Ratios Y/E March FY15 FY16 FY17 FY18E FY19E FY20E Basic (INR) EPS 10.0 15.7 16.7 18.1 20.6 23.7 Cash EPS 12.3 17.6 19.0 20.5 23.4 26.9 BV/Share 44.3 54.3 64.5 79.0 96.1 116.3 DPS 2.9 4.2 4.9 3.0 3.0 3.0 Payout % 28.7 28.5 29.2 16.6 14.6 12.6
Valuation (x) P/E 80.4 51.3 48.1 44.6 39.1 33.9 Cash P/E 65.4 45.6 42.4 39.2 34.5 29.9 EV/Sales 8.4 7.6 7.2 6.4 5.4 4.6 EV/EBITDA 50.8 34.6 32.0 29.4 25.3 21.5 P/BV 18.2 14.8 12.5 10.2 8.4 6.9 Dividend Yield (%) 0.4 0.5 0.6 0.4 0.4 0.4
Return Ratios (%) RoE 24.3 31.8 28.2 25.2 23.5 22.3 RoCE 23.6 30.3 26.8 24.1 22.7 21.7 RoIC 39.1 46.3 41.1 39.2 40.6 42.9 Working Capital Ratios Debtor (Days) 44 50 59 55 55 55 Creditor (Days) 62 73 68 69 68 68 Asset Turnover (x) 3.2 2.8 2.5 2.2 2.0 1.9
Leverage Ratio Debt/Equity (x) 0.0 0.0 0.0 0.0 0.0 0.0
Cash Flow Statement (INR Million) Y/E March FY15 FY16 FY17 FY18E FY19E FY20E PBT before Extra Ord 6,828 11,376 12,430 13,419 15,297 17,630 Add: Depreciation 1,178 1,005 1,151 1,264 1,416 1,633 Interest Paid 156 133 139 127 127 127 Less: Taxes Paid 1,694 3,335 3,851 4,160 4,742 5,465 Interest income 113 778 1,123 1,259 1,382 1,526 (Incr)/Decr in WC -718 -1,577 -1,694 -1,465 -1,655 -1,942 CF from Operations 5,637 6,822 7,054 7,927 9,061 10,456
Extra ordinary items -107 -48 -4 0 0 0 CFO after extraordinary 5,529 6,774 7,050 7,927 9,061 10,456
Incr in FA -3,723 -1,892 -2,019 -2,000 -2,000 -2,000 Free Cash Flow 1,806 4,882 5,031 5,927 7,061 8,456 Pur of Investments -996 -2,891 -1,500 -1,500 -1,500 -1,500 CF from Invest. -4,719 -4,782 -3,519 -3,500 -3,500 -3,500
Change in Networth -3,647 -5,276 -6,239 -1,791 -1,791 -1,791 Incr in Debt 125 264 0 0 0 0 Dividend Paid 1,789 2,519 2,909 0 0 0 Interest Paid -156 -133 -139 -127 -127 -127 Others 167 1,093 1,114 1,250 1,375 1,518 CF from Fin. Activity -1,722 -1,533 -2,355 -668 -543 -400
Incr/Decr of Cash -912 459 1,176 3,759 5,017 6,556 Add: Opening Balance 1,772 860 1,319 2,495 6,254 11,271 Closing Balance 860 1,319 2,495 6,254 11,271 17,827 E: MOSL Estimates
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Pidilite Industries
Corporate profile
Exhibit 1: Sensex rebased Company description Pidilite Industries is the largest branded adhesives player in India, with an iconic brand like Fevicol. Apart from a strong presence in adhesives, company has expanded into emerging segments like mechanized joinery, modular furniture, flooring, automotive care and water proofing through Dr Fixit and Roff.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%) Exhibit 3: Top holders Jun-17 Mar-17 Jun-16 Holder Name % Holding Promoter 69.6 69.6 69.6 Life Insurance Corporation Of India 2.9 DII 7.4 7.1 6.1 Axis Mutual Fund Trustee Limited A/C Axis FII 11.8 12.1 14.0 Mutual Fund A/C Axis Long Term Equity 1.8 Fund Others 11.2 11.2 10.3 The Genesis Emerging Markets Investment 1.3 Note: FII Includes depository receipts Source: Capitaline Company The Genesis Group Trust For Employee 1.2 Benefit Plans New World Fund Inc 1.2 Source: Capitaline Exhibit 4: Top management Exhibit 5: Directors Name Designation Name Name N K Parekh Vice Chairman Bansi S Mehta Ranjan Kapur M B Parekh Executive Chairman Sanjeev Aga Sabyaschi Patnaik Bharat Puri Managing Director A B Parekh A N Parekh Savithri Parekh Company Secretary Meera Shankar Uday Khanna Vinod K Dasari
Source: Capitaline *Independent
Exhibit 6: Auditors Exhibit 7: MOSL forecast v/s consensus Name Type EPS MOSL Consensus Variation (%) Delloite Haskins & Sells Statutory (INR) forecast forecast M M Sheth & Co Secretarial Audit FY18 18.1 18.5 -2.3 Mahajan & Aibara Internal FY19 20.6 21.4 -3.9 FY20 23.7 27.6 -14.1 Source: Bloomberg Source: Capitaline
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Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged inPidilite the business Industries of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Metropolitan Stock Exchange Of India Ltd. (MSE) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
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Disclosure of Interest Statement PIDILITE INDUSTRIES . Analyst ownership of the stock No A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.
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Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231; MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
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