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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) 3QFY01 3QFY02 Change
Net Sales 1,157 1,297 12.1%
Other Income 14 13 -7.9%
Expenditure 912 1,022 12.1%
Operating Profit (EBDIT) 245 275 12.1%
Operating Profit Margin (%) 21.2% 21.2%  
Interest 17 9 -49.7%
Depreciation 41 52 26.8%
Profit before Tax 202 228 12.9%
Tax 56 52 -5.9%
Profit after Tax/(Loss) 146 176 20.1%
Net profit margin (%) 12.6% 13.5%  
No. of Shares 25.2 25.2  
Diluted Earnings per share* 23.2 27.8  
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) 3QFY01 3QFY02 Change
Raw material 443 450 1.6%
Staff 83 93 12.1%
Packing material 128 129 1.1%
Others 258 350 35.6%
Total expenditure 912 1,022 12.1%

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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