Pidilite Industries Q2 Review - Sales Beat Impressive; Pressure On Margins To Escalate: Motilal Oswal
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Motilal Oswal Report
While Pidilite Industries Ltd.’s Ebitda and profit after tax were in-line, healthy sales momentum (two-year compound annual growth rate of ~21% in Q2 FY22) led to a significant sales beat, even as material cost pressures remained high.
Vinyl acetate monomer costs have nearly tripled in recent months over H1 FY21 levels after a relative drop over June–July 2021.
Good volume momentum and price increases (already healthy in the double digits, with more likely to come) would keep the sales momentum intact, even as margins continue to be under pressure.
Three factors highlight that Pidilite Industries has been able to manage steep cost inflation better versus paint companies (which also have a similarly large proportion of crude-related raw materials):
its near monopoly in adhesives,
the absence of mix deterioration, and
material costs peaking earlier compared with paint companies.
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