PIDILITIND Q2 FY24 earnings call.
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Revenue
₹3,076 Cr
verified against source
Revenue YoY
—
reported change
EBITDA
Pending
latest reported figure
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What the record says.
Pidilite delivered 8.2% standalone volume growth in Q2 FY24, driven by broad-based demand across domestic consumer Bazaar (8% UVG, 14% four-year CAGR) and B2B (20% UVG). VAM costs collapsed to ~$1,000/ton from $2,500/ton a year ago, enabling gross margin expansion of ~1,095bps YoY and EBITDA margin improvement of 600bps to 23.2%, despite aggressive A&P investment (2x YoY). The company commissioned 8 new plants YTD and expanded Pidilite Ki Duniya to 12,000 outlets (adding 1,000-1,500/quarter) in villages of 5,000-10,000 population. Araldite maintains >20% volume growth post-acquisition, and waterproofing grows at 10-13% market growth rate. The decorative paints pilot operates in AP, Telangana, and Odisha (towns <50,000 population), while the NBFC pilot targets INR 100 crore over two years via a separate team. Management targets double-digit volume growth with 1.5x GDP, though expects 4-5% volume-value gap to persist another two quarters. Key risks: VAM prices already firming from lows, geopolitical volatility on inputs, slow rural renovation recovery, and execution uncertainty on new initiatives.
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Guidance to track
- Margins expanded 600bps YoY to 23.2%, but VAM prices have started firming from lows. Management prioritizes volume growth over margin expansion, with no additional price cuts currently planned unless input windfalls recur.
- The 4-5% gap between 8% volume growth and lower value growth reflects cumulative price reductions taken. With last price reduction in Q2, management expects value growth to normalize toward volume growth within two quarters.
- Current quarter's 8.2% UVG was impacted by extreme wet weather disruptions in July (warehouse out of action for 7 days). Management aims to return to double-digit volume growth in next 3-6 months, with 1.5x real GDP as long-term structural target.
- Lending business being piloted in one region with separate heavyweight team. Post-pilot learnings, all options on table including asset-light partnerships. Capital exposure will be limited; pilot size is INR 100 crore over two years before scale decisions.
Risks flagged
- VAM has already started moving up from $1,000/ton lows. While still within comfortable range, sustained input cost inflation could pressure the 20%-24% margin guidance band, especially with no further pricing actions planned.
- While new construction and organized real estate show clear recovery, renovation/remodeling in rural areas hasn't recovered as expected post-COVID. Management acknowledges K-shaped recovery dynamics and cautious consumer sentiment in tier-2/3 markets.
- Analyst pressed management multiple times on paints differentiation strategy and NBFC business model. Management deflected paint competitive positioning questions ('give us three months') and NBFC scale ambitions, suggesting limited visibility on these early-stage initiatives.
- Management explicitly flagged geopolitical situation impact on VAM prices and export demand. International subsidiaries face currency devaluation challenges in multiple markets despite modest sales growth.
Key quotes
- We're already at 12,000, and we are pretty much adding between 1,000-1,500 every quarter. We are rapidly expanding the Pidilite Ki Duniya network.
- Based on the commodity prices, this seems appropriate, but if we again get some windfalls, we will do that, because finally we must offer value to the consumer at the right margin.
- This is a separate team, completely different from the Pidilite team, and once we announce the team, you will see it's a very heavyweight team.
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