Shares of Pidilite Industries witnessed a sharp decline of over 5 percent on May 8, marking the largest intraday fall in four months. This significant drop followed the release of the company’s quarterly results for the period ending March 2024, which were perceived as mixed by the market.
Although Pidilite Industries reported a 19.3 percent year-on-year increase in consolidated net profit to Rs 364 crore, and a 7.9 percent growth in revenue to Rs 2,902 crore, these figures fell short of street estimates.
Foreign brokerages such as Citi and Macquarie maintained their pessimistic views on Pidilite post-Q4 results. Citi, which has a ‘sell’ rating for the stock, expressed concerns that the company’s earnings missed its estimates across all parameters. The brokerage set a target price of Rs 2,200 per share, indicating a downside of over 24 percent from the previous closing price.
Macquarie, retaining its ‘underperform’ rating on Pidilite Industries, cited Q4 EBITDA missing estimates as the reason behind its stance. The brokerage highlighted increased brand investments leading to higher other expenses for the company.
While both urban and rural markets showed growth for Pidilite in Q4, rural markets outpaced urban growth. However, analysts at Macquarie flagged concerns about near-term demand.
Despite short-term softness expected in the environment, Pidilite remained optimistic about market demand in the medium term, citing an overall increase in construction activities, government spending, and prosperity.
In contrast to Citi and Macquarie, Nuvama Institutional Equities maintained a ‘buy’ rating on Pidilite, with a target price of Rs 3,220 per share. The brokerage indicated that it would reassess estimates and target price post the earnings conference call scheduled later in the day.
Goldman Sachs also expressed bullishness on Pidilite after Q4 results, noting continued strong double-digit growth for the company. However, management commentary on near-term demand softness surprised analysts.
As of 11:15 am, Pidilite shares were trading at Rs 2,805.05 apiece on the National Stock Exchange (NSE), marking a nearly 5 percent decrease from the previous close. The stock has declined approximately 10 percent in the last five sessions, erasing most of the year-to-date returns. Over the past year, the stock has risen around 14 percent, underperforming the benchmark Nifty 50, which has seen a 21 percent increase during the same period.
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