• APRIL 1, 2002

Pidilite: Sticking to core

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%
Operating Profit (EBDIT)24527512.1%
Operating Profit Margin (%)21.2%21.2% 
Interest 179-49.7%
Profit before Tax20222812.9%
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 

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%
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.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407