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  • 10 Nov 2022
  • ICICIdirect Research

Margin pressure sustains in ​Pidilite's Q2FY23 performance

PIDILITIND - 3267 Change: 12.90 (0.40 %)

News:

 Pidilite’s consolidated revenue came in at ~Rs 3011 crore, up ~15% YoY led by both consumer & bazaar (C&B) and B2B segments. Standalone revenue (90% of consolidated revenues) increased 15% YoY to ~Rs 2715 crore led by price hikes. Segment wise, C&B products revenues increased 14% YoY to Rs 2196 crore. B2B business segment revenue grew 18% to ~ Rs 552 crore. The gross margin during the period declined sharply by 441 bps YoY (down 71 bps QoQ) dragged by higher raw material prices and adverse currency movement. The EBITDA margin declined 433 bps YoY (47 bps QoQ) to 16.6% tracking lower gross margins. PAT declined ~10% YoY to ~Rs 338 crore, dragged by lower EBITDA margin

View:

 We believe Pidilite’s Q2FY23 print was weak led by sharp fall in EBITDA margins. The exit EBITDA margin of ~17% is still lower to its pre-covid level EBITDA margin range of 20-21%. We believe this was largely due to delay in price hikes and use of high costs inventories in Q2FY23. We believe the benefit of lower raw material prices to start flowing from coming quarters thereby driving margin recovery. On the topline front, revenue growth was mainly led by price hikes whereas volume growth was muted in the consumer & bazaar segment mainly due to lower rural demand. We await management commentary on sustainability of future demand and EBITDA margins outlook

Impact:

Negative