Accumulate Pidilite Industries; target of Rs 1600: Prabhudas Lilladher

What happened

Prabhudas Lilladher retained an Accumulate rating on Pidilite Industries and set a target price of Rs 1600. The broker cited healthy volume growth and resilient demand, even as higher input costs reduced profit per sale, which means the EBITDA margin.

Confirmed

Global impact / market context

The broker kept a positive rating but cut its target price, signaling slightly less upside than before. Because higher input costs reduced profit per sale, investors should watch whether cheaper raw material restores earnings and supports the broker's projected growth in profit per share.

Analyst inference

Crude prices and a rebound of about 34% in VAM prices, which means a key raw material, are squeezing profitability. The broker expects margin recovery in the third quarter from cheaper material bought earlier, but warns of pressure in the fourth quarter if input costs stay high.

Analyst inference

What to watch

1. The broker estimates 16.5% yearly growth in profit per share and values the stock at 45 times its projected earnings; profit per share means earnings for each share. Confirmed
2. Pidilite plans strategic tie-ups to launch technologically advanced products and targets 2-4x growth in pioneer and growth categories, which make up about 50% of sales. Proposed
3. Watch whether crude and VAM prices stay elevated; if they do, the expected margin recovery could reverse and pressure profit per sale in the fourth quarter. Analyst inference

Evidence

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