Pidilite stock rally fizzled out in 2022; here’s the new target price

Shares of Fevicol maker Pidilite Industries Ltd have underperformed the broader market in the last one year. The large cap stock has lost 8% against a 0.76% fall in the 30-stock Sensex during the period. Prior to 2022, the Pidilite stock had clocked multibagger returns. It climbed 176% in five years and 1,011% in the last ten years. The stock gained 50% from January 11, 2021 (Rs 1,831) to January 11, 2022  (Rs 2748) on BSE.

In terms of technicals, the relative strength index (RSI) of Pidilite Ltd stands at 40.9, signaling it's neither oversold nor undersold. Pidilite stock has a one-year beta of 0.8, indicating low volatility during the period. Pidilite stock stands lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.   

In the current session, Pidilite stock closed 1.93% lower at Rs 2480 today against the previous close of Rs 2529 on BSE. The stock has been falling for the last two sessions. Market cap of Pidilite fell to Rs 1.26 lakh crore on BSE. 

Total 0.13 lakh shares changed hands amounting to a turnover of Rs 3.18 crore on BSE. The stock hit a 52-week low of Rs 1988.60 on June 17, 2022 and a 52-week high of Rs 2,916 on September 15, 2022 on BSE. 

In the second quarter of the current fiscal, Pidilite reported a 11.27% fall in its consolidated net profit for the July-September quarter at Rs 332.44 crore against a net profit of Rs 374.65 crore in the corresponding period of the previous fiscal.  However, sales rose 14.65% to Rs 3,011.5 crore in Q2 of this fiscal against Rs 2,626.35 crore in the September quarter of the previous fiscal. 

After a tepid show in 2022 marred by Q2 earnings, here's a look at what analysts expect from the stock in the current year.

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Kaustubh Pawaskar- analyst, Sharekhan by BNP Paribas said, "Pidilite Industries underperformed the broader indices in last one year as the business profitability was marred by significant increase in the Vinyl acetate monomer (VAM) prices due to global uncertainties, which led to sharp decline in the profitability in FY2022 and H1FY2023. Further the valuation at 63x its FY2024 earnings is at a premium to some of other home improvement companies. VAM prices have corrected by 50% plus from its Q2 high, which will help the profitability to improve in the quarters ahead. However, the current premium valuations will continue limit the upside from the current level."

Abhijeet from Tips2trade said, "Despite a below par quarterly performance in the previous quarter & a tepid stock price performance in 2022, Pidilite still continues to remain a strong & consistent market leader with excellent fundamentals considering a weakening domestic and global economy. Currently the stock looks weak on the daily charts with strong support at Rs 2,461. Pidilite needs to close above Rs 2,560 on the daily charts for investors to buy for targets of Rs 2,800-2,870 in the near term."

Om Mehra, Equity Research Analyst Choice Broking said, "Pidilite Industries stock has declined by 8.39 percent over the past year; however Sensex is also at a stage where it has made no gains or losses. The stock trading below 50 and 200 DMA would be short term concerning. Technically the stock is trading with Lower Low- Lower High pattern indicates distribution phase is intact.  RSI and MACD remain on oversold zone. The delivery volume has decreased by 14 percent over the previous month. According to the price movement on the weekly chart, the stock has a strong base around the  Rs 2300 zone. Furthermore, investors would expect stronger outcomes in the forthcoming quarterly results and would enter after that. On the record date of September 2022, FIIs own 11.34 percent of the stock. Investors may opt to buy in decline cautiously as stock may slowly rebound from current levels, in coming days. As the stock has slowed down, it would be a better opportunity for long-term investors to accumulate in slots. The best way to enhance wealth is to accumulate quality stocks when the majority of people are not considering it even though the company has a strong balance sheet and consistent YOY performance."

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock has witnessed a decent rise from Rs 2,000 level to  Rs 2900 zone in the recent past but thereafter has gradually slipped overall steadily with a slightly weak bias and currently has touched the significant 200DMA of Rs 2495. It is currently moving below the moving average which is a crucial important zone and technically. We have the previous bottom as the next near-term support zone near Rs 2460 level and a decisive breach can weaken the trend further to anticipate for further fall. For the trend to improve, the stock needs to move past the Rs 2,570 level decisively and can anticipate for further rise." 

Jitendra Upadhyay, senior Equity Research Analyst, Bonanza Portfolio said , "Cost of raw material has beaten down Pidilite stock from several quarters due to this reason EBITDA and PAT decline of more than 10% in latest quarter. As prices of the some of the row materials are cooling off from its high Q2FY23 which will benefit in EBITDA and PAT level in going forward. Though, the current premium valuation of the stock has given limited scope for upside from the current market price." 

However, in the first quarter of the current fiscal, Pidilite Industries reported a 64.27 per cent rise in consolidated net profit at Rs 357.52 crore led by growth in sales and volume. The company logged a profit of Rs 217.64 crore in the April-June period a year ago. Revenue from operations climbed 60.11 per cent at Rs 3,101.11 crore in Q1 against Rs 1,936.79 crore in the year-ago period.

Pidilite Industries is engaged in the manufacturing of adhesives, sealants, waterproofing solutions and construction chemicals, arts & crafts, industrial resins and polymers.

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