Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pidilite Industries Ltd (BOM:500331, Financial) reported underlying volume growth of 9.6% for Q1 FY25, with Consumer and Bazaar businesses growing by 8% and B2B businesses by 18%.
- Gross margins expanded year-on-year by 465 basis points due to moderation in input prices.
- EBITDA margins for the stand-alone entity improved to 24.6%, higher by 187 basis points compared to Q1 last year.
- The company continues to invest in brand building, upgrading manufacturing facilities, and expanding its distribution network.
- International subsidiaries, excluding Pidilite USA and Pulvitec, saw revenue growth of 9% and an EBITDA margin improvement of 190 basis points.
Negative Points
- The Kerala market experienced a significant slowdown in demand, which could potentially spread to other markets.
- Domestic subsidiary revenues remained flat, indicating potential challenges in the local market.
- The company has not taken any significant pricing rollbacks in Q1, which could impact future pricing strategies.
- The working capital situation, although healthy, was lower than March '24, which might affect liquidity.
- The B2B business, despite strong growth, may not sustain the 18% growth rate consistently.
Q & A Highlights
Highlights from Pidilite Industries Ltd (BOM:500331) Q1 FY25 Earnings Call
Q: Have you seen any slow demand in Kerala or any other states in Q1?
A: Yes, Kerala has been soft compared to other markets. There is a demand issue in Kerala, but the magnitude may differ from company to company. We are waiting to see how the market performs during the Onam festival season before drawing conclusions. - Bharat Puri, CEO & MD
Q: Can you provide more details about your new product, Experior, and its market potential?
A: Experior is being piloted in select geographies. It bridges the gap between paints and cement, offering long shelf-life and durability. We are assessing its market potential and application issues specific to India. In markets like Southern Europe, this product category represents up to 15-20% of the exteriors market. - Bharat Puri, CEO & MD
Q: Have there been any pricing actions in Q1, and what is the current VAM price?
A: No significant pricing rollbacks were taken in Q1. The current VAM price fluctuates between $850 and $1,000 per ton. - Bharat Puri, CEO & MD
Q: Can you provide an update on your NBFC business?
A: The NBFC business has rolled out as planned. We have started giving out loans in one city as a pilot with limited capital. We will evaluate the pilot's performance over six months before deciding on the next steps. - Bharat Puri, CEO & MD
Q: How is the rural versus urban growth, and what are the key drivers in rural markets?
A: Rural growth, termed as Emerging India, has outpaced urban growth for eight consecutive quarters. The growth is primarily in B2C segments, driven by substantial penetration and range expansion opportunities. We have increased our distribution touchpoints significantly in rural areas. - Bharat Puri, CEO & MD
Q: What is the current capacity utilization, and how has CapEx impacted asset turnover?
A: Capacity utilization is between 70-75%. We start looking at fresh capacity once we cross 75%. The nature of CapEx has changed, focusing more on newer categories, which has impacted asset turnover. We expect this to stabilize over the next two to three years. - Bharat Puri, CEO & MD
Q: What is the outlook for EBITDA margins for the rest of the year?
A: We expect to maintain EBITDA margins in the 20-24% range, likely at the higher end if input costs remain stable. We will invest more aggressively for growth if we see signs of stability. - Bharat Puri, CEO & MD
Q: Can you provide insights into the B2B portfolio and its growth prospects?
A: The B2B portfolio includes industrial adhesives, pigments, and project businesses. All three verticals are growing healthily. We aim for double-digit underlying volume growth in B2B over the next two to three years. - Bharat Puri, CEO & MD
Q: What are the opportunities for international exports, particularly in Africa?
A: We are growing substantially in Africa, the Middle East, and neighboring regions. Africa has been a fast-growing geography for us, and we continue to see strong double-digit growth in these markets. - Bharat Puri, CEO & MD
Q: Are you confident about achieving double-digit volume growth for the full year?
A: Yes, barring any black-swan events, we aim for double-digit volume growth. Our Q1 underlying volume growth was 9.6%, close to our target. We measure underlying volume growth, which we believe is a better indicator of real growth. - Bharat Puri, CEO & MD
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
