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Pidilite: Sticking to core

Apr 1, 2002

Adhesives and sealants major, Pidilite Industries, continues on its growth path. For the December quarter ended 2001, the company logged in a 20% growth in net profits. The company's topline improved by 12% during the quarter.

(Rs m)3QFY013QFY02Change
Net Sales1,1571,29712.1%
Other Income1413-7.9%
Expenditure9121,02212.1%
Operating Profit (EBDIT)24527512.1%
Operating Profit Margin (%)21.2%21.2% 
Interest 179-49.7%
Depreciation415226.8%
Profit before Tax20222812.9%
Tax5652-5.9%
Profit after Tax/(Loss)14617620.1%
Net profit margin (%)12.6%13.5% 
No. of Shares 25.225.2 
Diluted Earnings per share*23.227.8 
P/E Ratio 6.5 
*(annualised)   

Pidilite's flagship product ‘Fevicol’ is a generic name for adhesives in India and commands 60% market share. The company is backed by a strong R&D base and has pioneered almost 60% of the products it sells. Therefore, its products command a huge price premium over competing brands. The companies other major brands are 'M-seal', 'FeviKwik' and 'Ranipal'.

Though Pidilite's operating margins have remained stable at over 21% YoY, a lower interest and tax outgo has helped propel net margins. In the consolidated nine month period (April-December 2001) the company has clocked an 8% growth in topline and around 9% growth in net profit.

Cost break-up
(Rs m)3QFY013QFY02Change
Raw material4434501.6%
Staff 839312.1%
Packing material1281291.1%
Others25835035.6%
Total expenditure9121,02212.1%

Though competition has come in branded adhesives and sealents with 'Parcol' as well the Kitply Group's 'Kitcol', Pidilite has managed its grip on the market through innovative products. The company is also a famed marketer of adhesives. Its ad-campaigns for Fevikwik and Fevicol are top award recipients. However, its entry into the branded fabric whitener through acquisition of 'Ranipal' in FY00 is viewed with skepticism.

At the current price of Rs 179 the company trades at a reasonable P/E of 8x annualised nine month FY02 earnings. In the longer term, it is the company's focus on its branded adhesives business that will stand investors in good stead.

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