Will inflation play a spoilsport for Fevicol maker Pidilite?

Pidilite Share Price: Shares of Fevicol maker Pidilite traded in the green on Tuesday, November 22, on the back of a positive view by the global brokerage firm USB. At 11:20 AM, the counter quoted Rs 2,687 apiece on NSE, gaining 1 per cent.

USB in its report said that high inflation and negative consumer sentiments will have an impact on demand. It has cut FY23 Earnings Per Share (EPS) estimate by 9 per cent on elevated raw material costs and higher advertisement spending in H2.

The report added that the company's input costs have almost doubled in the last 30 months but the management is optimistic and does not see any structural issues.

UBS has maintained 'neutral' rating on the counter and sees up to Rs 200 upside apiece. The brokerage house has revised the target to Rs 2,850 from the previous target of Rs 2,662.

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Pidilite Industries has recently announced its quarterly result for the month ending in September. The company recorded earnings before interest, taxes, depreciation, and amortization (EBITDA) for the current quarter at Rs 500 crores, lower by 9 per cent over the same period last year.

Chief Financial officer (CFO) Sandeep Batra in the earnings call for Q2FY23 had said that on a blended basis certainly while Pidilite sees margins improving and maybe in the fourth quarter the company should be able to report EBITDA margins more than of 20 per cent, but did not comment on the actual number.

The company recorded a consolidated net profit of Rs 338 crore which was a decline of 10 per cent Year-on-Year (YoY). However, net sales grew by 15 per cent at Rs 3,000 crore YoY.

Pidilite had said that consumption was affected due to inflation, “While demand conditions remained soft, with inflation impacting consumption, we remain cautiously optimistic on improving demand conditions, thanks to the good monsoon as well as increased construction activity. The softening of commodity cost, especially Vinyl Acetate Monomer (VAM), will sequentially improve our profitability. As an organisation we continue to invest in our brands, supply chain, digital infrastructure, and distribution to deliver consistent volume led profitable growth.”

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