Pidilite was incorporated in 1959 and currently has 2900 employees. The company is involved in the production of Consumer as well as Industrial goods. The majority of the revenue however is being derived from the consumer segment. The ratio is as much as 73:27 tilted in favor of consumer goods. The consumer products include Art Materials, Publications, Construction and Paint, Chemicals, Adhesives and Sealants, Fabric Care, Car Care, Maintenance Products. The industrial Segment includes Industrial Adhesives, Industrial Pigments, Industrial and Textile Resins and Leather Chemicals.
The well known brands of Pidilite include Fevicol, M-Seal and Dr. Fixit.
The industrial products include industrial adhesives, industrial pigments, leather chemicals and textile resins.
The company's products conform to global quality standards, which is seen by the fact that it exports to developing and developed countries around the globe. The products are exported to more than 50 countries. Exported products include Art Material and Adhesives, which are bought by consumers, as well as Original Equipment Manufacturers. The company adheres to international standards and has certification from international testing agencies like ACMI, ITS and SGS. The organic pigment is exported to paint, ink and paper manufacturers around the world.
The company is likely to benefit from the steady growth in the user industries and the fact that the margins in the industrial goods are higher than those in the consumer goods means that the company will be able to enhance its profitability gradually as the tilt between the ratio of consumer products to industrial products tilt in favor of industrial products.
The company seems to be poised towards a growth rate of 15 to 20% in top line as well as bottom line. This is despite the fact that the price of raw material has increased for the company. Even though the price of raw material has increased in the current fiscal the profitability ratios have remained the same. This is because of various cost cutting measures undertaken by the company. The ratio of employee cost to turnover is constantly coming down in the last quarters and shows that there is deliberate action being taken place towards this front.
The company has got strong fundamentals and the fact that the brands are very strong in the consumer segment which assures one growth in their stronghold. And the plus is that the user industries are growing healthily so the company is bound to grow with them and this growth is going to be more profitable than in the past because the margins are higher in the industrial segment.
The fact that the share price is ruling at around Rs. 420 which is just 12 times the expected FY 05 earnings makes the stock very attractive as this is a company which enjoys strong brands in the consumer segment and its share in the industrial segment is also growing.
The only danger that the company faces is that the main raw material VAM is derived from crude oil and the steady increase in the price of crude prices will put some pressure on the profit margins of the company.
