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nifty 22,147.90

-124.60 (-0.56%)

16-Apr-2024 | EOD

sensex 72,943.68

-456.10 (-0.62%)

16-Apr-2024 | EOD

MOFSL 2,026.55

36.95 (1.86%)

16-Apr-2024 | EOD

Corner Office Back

The corner Office: Focus on double-digit volume growth

31-Jul-2017

Pidilite Industries (PIDI) is cautious on near-term performance, given GST implementation. While it might take a month or so to assess the impact of GST, PIDI perceives it as a positive reform for the Adhesives industry.
Underlying demand remains healthy, and during our meeting, Mr Puri reiterated time and again PIDI's long-term target of delivering double-digit volume growth. He also reiterated that current margins are unsustainable, prioritizing volumes over margins.
While he highlighted the attractive long-term opportunity in a variety of categories, PIDI does not intend to enter Paints unless it gets a disruptive proposition. The company has a strategy of deriving 2/3rd growth from 'Growth' and 'Pioneer' categories and the remaining 1/3rd from 'Core' categories. It will continue to expand reach and make significant investments in R&D to build a strong foundation for multiple years of growth.
Our view: Its track record of consistent delivery on volumes and profits drives our preference for PIDI. We prefer PIDI to Asian Paints (both NEUTRAL-rated stocks), as return ratios have converged – Asian Paints RoCE has come off from mid-40s to late 20s in five years while its valuations have expanded. Even fixed asset turns are similar now. Asian Paints’ growth moderation over the last 3-4 years also makes it relatively unattractive

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