Reviews
In this edition, we have reviewed E.I.D Parry (India) Ltd. and Pidilite Industries Ltd. We suggest our readerinvestors to HOLD E.I.D Parry (India) Ltd. and Pidilite Industries Ltd.
We had recommended East India Distilleries (E.I.D) Parry Ltd. in Volume 36, Issue No. 13 dated May 24 to June 6, 2021 under the ‘Analysis’ segment. The recommended price for the stock was Rs 424.80. We had recommended the stock since E.I.D Parry has emerged to be a strong player in the sector with high quality and robust expansion and manufacturing plans. It is an Indian public company headquartered in Chennai, Tamil Nadu that has been in business for more than 225 years. The company is currently engaged in the manufacture and marketing of sugar and bio-products. It is known for being a pioneer in setting up India’s first sugar plant and even today continues to lead new paths in each of its businesses.
It is counted amongst the leading sugar manufacturers in India and operates through nine sugar plants spread across South India. Looking at the financial performance of the company, it has posted net sales of Rs 6,978.41 crore in Q2FY22 from Rs 5,836.21 crore in Q2FY21 i.e. a growth of 19.57 per cent. The operating profit for Q2FY22 stands at 772.65 crore as compared to Q2FY21 which was Rs 889.22. Net sales have seen a slowdown and dipped to Rs 470.75 crore in Q2FY22 with a decline of 16.18 per cent as related to Rs 561.61 crore in Q2FY21. In terms of annual consolidated financial performance, the company posted net sales and operating income for FY21 at Rs 18,587.45 crore, up by 8.52 per cent from Rs 17,128.92 crore in FY20.
Operating profit ascended by 9.84 per cent from Rs 2,018.02 crore in FY20 to Rs 2,216.63 crore in FY21. Consequentially, net profit climbed 11.95 per cent from Rs 891.21 crore in FY20 to Rs 997.74 crore in FY21. The company had beenworking to cut debt periodically and the debt position was much better compared to what it was as of March. Asserting that the company was exercising tight controls on borrowing and interest costs, the finance cost for the quarter decreased by Rs 9.67 crore to Rs 12.98 crore. The ROE has increased from 5.58 per cent to 13.10 per cent. Long-term debt, which was about Rs 200 crore in March, had been brought down to Rs 101 crore and short-term loans from Rs 355 crore to Rs 102 crore. It has reduced total debt by more than 63 per cent during the FY21. The company has upside potential. Hence, we recommend HOLD.
We had recommended Pidilite Industries Ltd. in Volume 36, Issue No. 14 dated June 7 to June 20, 2021 under the ‘Choice Scrip’ seg ment. The recommended price for the stock was Rs 2,064.60. We had recommended the stock on the basis of huge growth potential, good returns of capital employed and good ROCE. The company manufactures products which can be segmented into consumer items such as art materials and stationery, food and fabric care, car products and adhesives and sealants, and speciality industrial products like industrial adhesives, industrial pigments, industrial and textile resins, leather chemicals, construction chemicals and other industrial chemicals.
Pidilite Industries also markets the ‘Fevicol’ range and its other brands are FeviKwik, Dr. Fixit, Roff, Cyclo, Ranipal, M-Seal and Acron. Analysing the financial performance of the company in the recent quarter, on a consolidated quarterly basis the net sales and other operating income was recorded at Rs 2,626.35 crore in Q2FY22 as compared to Rs 1,880.333 crore in Q2FY21, giving a rise of 39.67 per cent. The operating profited ascended 5.46 per cent from Rs 534.33 crore in Q2FY21 to Rs 563.49 crore in Q2FY22. Net profit of Q2FY22 was recorded at Rs 374.88 crore as against net profit of Rs 355.83 crore reported in Q2FY21. On the annual front, net sales tripped 0.02 per cent to Rs 7,292.71 crore in FY21 over FY20. The operating profited scaled 2 per cent in FY21 to Rs 1,760.02 crore from Rs 1,725.45 crore in FY20. Net profit of Rs 1,122.15 crore was reported in FY21 as compared to net profit of Rs 1,119.02 crore reported in FY20, posting an increase of 0.28 per cent.
The company has performed very well in the last six months. It has also acquired Aap ka Painter Solutions to take its holding to 47 per cent. The stock has given a return of staggering 37 per cent on YoY basis. In the last 12 months, Pidilite Industries has rallied nearly 61.1 per cent as compared to 51.6 per cent. The current price of the stock is trading around 4.6 per cent away from the 10-week moving average. In the last 12 months, Pidilite Industries has rallied nearly 61.1 per cent as compared to 51.6 per cent for the Nifty 50. It has been a completely debt-free company for many years. The company’s strength lies in making innovative adhesive products for various needs of its consumers. Such a product was not available in the market earlier and has no competitor so far, giving Pidilite Industries a monopolistic position. Hence, we recommend HOLD.
(Closing price as of Dec 28, 2021)