Hold Pidilite Industries; target of Rs 1317: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Pidilite Industries

We retain our hold rating on the stock despite near term demand pressures due to COVID19 and little construction/wood work activity given strong business moat and sustained investment behind categories of future like 1) waterproofing and construction chemicals 2) Wood coatings 3) Industrial floorings and 4) stake in Tenex India Stone Products. PIDI has also acquired 2.4% stake in Papperfry, which will open new growth opportunities for its products and can have larger implications, in our view. While Benign VAM prices will help prevent sharp margin erosion, expect 1H21 to show steep decline in sales and profitability.

Outlook

We estimate 11.2% PAT CAGR over FY20-22 and value the stock at Rs1317 based on SOTP (45xFY22 to standalone business). Retain HOLD, expect returns to be back ended.

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