Pidilite Industries Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Pidilite Industries Limited (PIDILITIND) Q2 FY23 Earnings Concall

Q&A Highlights:

• [00:06:02] Avi Mehta from Macquarie asked about VAM consumption rate for the quarter. Sandeep Batra CFO replied that VAM consumption rate was $2,491 per tonne vs. $2,231 in 1Q23. And in 2Q22, it was $2,071 per tonne. PIDILITIND added that current spot rate are ranging between $1,200-1,400.

• [00:13:11] Ritesh Shah from Investec asked about the comments on the recent amendment to Section 194R under the IT Act, giving incentive to the channel partners.  Bharat Puri MD said that it definitely impacts the company.  PIDILITIND added that it has evolved a set of policies taking the amendment into account.

• [00:16:55] Ritesh Shah from Investec enquired about the incremental pricing trends for the two segments.  Bharat Puri MD clarified that the company is not seeing itself taking any more price increases. PIDILITIND is fully priced currently.

• [00:18:02] Latika Chopra with J.P. Morgan asked about the exposure of PIDILITIND portfolio towards new construction and the momentum the company is seeing in it. Bharat Puri MD said that it’s difficult to tell as different division of the company has different exposure to new construction. Two-third of PIDILITIND’s business tends to come from renovation and repair, and one-third from new construction. In new construction there is certain tailwind across the board.

• [00:21:21] Latika Chopra with J.P. Morgan asked about the salience of B2B generally in the overall business mix. Bharat Puri MD said that in B2B one raises and reduce prices much faster because the customer is getting impacted straight away. And given its size, B2B remains about 15% of the company’s business, so it’s not a substantial impact. From a profitability view, it’s being worked through the plans.

• [00:26:52] Shirish Pardeshi from Centrum asked about the vetted inflation at this point in time. Sandeep Batra CFO said that the company has a RM index that it tracks internally. Taking base year as ’19-‘20, that index reached up to 193 in June and went up to 200 in Sept. And now it’s coming down to 180 or so in 3Q23.

• [00:28:15] Shirish Pardeshi from Centrum enquired about any effort on expanding the distribution. Sandeep Batra CFO said that one of the company’s drivers of growth is sales and distribution. On a consistent basis, over the next 3-5 years, this will remain an avenue of growth for Pidilite.

• [00:30:00] Shirish Pardeshi with Centrum enquired about the distribution advantage to the paint companies vs. PIDILITIND. Bharat Puri MD said that the number of outlets paint companies cover is far less than what PIDILITIND covers. On a direct basis, PDILITIND will be covering twice the number of outlets than the largest paint company.

• [00:34:01] Ritesh Shah from Investec asked about any segment the company has vacated over last 5-7 years on the B2B side of things. Bharat Puri MD said that the company had a whole range of lower priced products that were at the base level for furniture, joineries etc. So either they were priced higher or vacated those both in B2C and B2B.

• [00:36:44] Ritesh Shah from Investec enquired about the capex plans for FY23 and FY24. Bharat Puri MD answered that over the last 3 years and over the next 3 years, PIDILITIND’s capex tends to remain between 3-5% of sale, but it remains a very active part of the company’s growth plans going forward.