13-05-2025
Pidilite's growth gets stickier, but valuation a sore spot
Pidilite Industries Ltd's March quarter (Q4FY25) makes one thing clear: volume growth is resilient and the momentum is being sustained by demand. Consolidated revenues grew 8.2% year-on-year to ₹3,141 crore, backed by standalone underlying volume growth of 9.8% across categories and geographies. Volume growth is at a multi-quarter high.
Gross profit margin rose by 160 basis points (bps) to 55%, which is an 18-quarter high, according to data from Motilal Oswal Financial Services. Margin got support from benign input costs, especially vinyl acetate monomer (VAM), which averaged $880 a tonne in Q4, down from $925 a tonne last year.
However, year-on-year Ebitda margin expansion was smaller at 26 bps to 20.1%. In fact, the metric fell as much as 356 bps versus Q3 as Pidilite ramped up advertising spends and incurred a one-time staff cost adjustment.
For the full year, Ebitda margin has expanded 106 bps to almost 23% in FY25. Pidilite's operating margins are high, and it will be crucial to monitor whether the company can sustain such high levels, reckon Motilal Oswal's analysts in a 9 May report.
Pidilite's management is guiding for double-digit volume growth in FY26 (domestic business), despite a high FY25 base when volume growth was 9.3%. The company is banking on a post-election construction push, rural tailwinds, and innovation-led launches such as Fevicol Hi-PER Star. Urban demand, which improved in Q4, is likely to sustain. That said, the company is watchful of the impact of uncertain global economic and geopolitical conditions.
Meanwhile, Pidilite's crucial consumer & bazaar (C&B) segment, forming 81% of FY25 standalone revenues, saw 8% volume growth in Q4. Standalone C&B Ebit margin was up 60 bps year-on-year to 26.4%. Rural demand continued to outperform and urban showed a sequential pickup.
The rest of the standalone revenue in FY25 came from industrial business-to-business (B2B), which saw much higher volume growth of 16.4% in Q4, led by rising construction demand and a shift to integrated, system-based solutions through Pidilite Professional Solutions.
A richer project mix and operating leverage aided profitability, taking Ebit margin to a record 18.3%, up 710 bps. B2B put up a solid show for FY25 as well, clocking Ebit growth of 53%, which was far ahead of 9% C&B Ebit growth. Pidilite expects B2B growth and margin tailwinds to sustain, supported by strong infra demand and deeper engagement with EPCs and consultants.
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What next?
Going ahead, investors will track if the company can sustain Ebitda margin. While lower input costs, particularly crude-linked derivatives, offer respite, those tailwinds may not last.
Q4 saw a sharp spike in employee expenses due to one-off provisions, and the room for further margin expansion appears limited unless revenue growth accelerates meaningfully. Management is focused on striking the right balance between pricing, market share, and profitability—prioritising long-term sustainability over short-term margin gains.
Plus, a strong balance sheet augurs well. 'Pidilite is well placed to sustain growth, sustained innovations, tie-ups to bring technologically advanced products and 2-4x growth in pioneer and growth categories (45% of sales)," said a PL Capital report dated 12 May. 'Near term margin outlook seems fine, although margins leave little scope of expansion from current levels," they added.
In this backdrop, valuations are not exactly mouth-watering. Pidilite's shares trade at 65x FY26 estimated earnings, according to Bloomberg estimates—a valuation that assumes robust growth acceleration.
If cost tailwinds fade and global headwinds persist, execution will need to remain airtight. Pidilite will need to prove that this volume-led comeback has staying power.
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