Pidilite up on solid results

Thu, 22 Jul 01:30 pm

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Indian indices shed their opening losses as buying interest revived in heavy weights during the last two hours of trade. Stocks from consumer durable and metal space are trading firm while stocks from the realty and IT space are trading weak.

The BSE-Sensex is trading down by 12 points while NSE-Nifty is trading flat. BSE-Midcap index and BSE-Smallcap index are both trading 0.2% above yesterday's closing. The rupee is trading at 47.24 to the US dollar.

FMCG stocks are trading mixed with Pidilite Industries and Godrej Consumer trading firm while P&G and HUL are trading weak. Pidilite declared its 1QFY11 results yesterday. The company's top line grew by 22% YoY. This performance came on the back of higher demand for its consumer & bazaar products and industrial products. The consumer products segment grew by 21% YoY while the industrial products segment grew by 22% YoY during the quarter. However, the others segment comprising of VAM fell by 28% YoY. The operating margins of the company grew by 1.3% on the back of lower staff cost and lower other expenditure as a percentage of sale. The margins could have been better but for higher input costs increased as a percentage of sales. Pidilite's net profit increased by 26% YoY during the quarter. This performance came on the back of higher operating income and lower forex loss. However, higher effective tax rate put some pressure on this growth. On a long terms basis, we believe the company has great potential for growth.

Stocks of auto manufacturers are trading mixed with Bajaj Auto and M&M trading firm and Maruti Suzuki and Hero Honda trading weak. In response to the slew of new launches taking place in the small car segment in India, the country's largest passenger vehicle manufacturer Maruti Suzuki is launching a new variant of its largest selling car brand, the Alto. The new Alto, which is planned to roll-out in August this year, will come with the new K-10 engine, and will have a slightly smaller engine capacity as compared to the original Alto that was launched way back in the year 2000. While this vehicle will be priced slightly higher than the original version, the new car is believed to be much more fuel-efficient (as per the company, the car would have a mileage of 20.2 km per litre) among existing cars in the top-end-entry level compact car segment (A2). Further, the new Alto will be available in two variants. The company has been worried about losing its market share in the passenger car segment and has no option but to face competition by strengthening its product portfolio. And launching a variant of its largest selling car brand in the small car would definitely be a way to curb and maintain, if not grow, its market share.