INTRODUCTION
Pidilite Industries Limited is an Indian adhesives manufacturing company.[3] It manufactures products which can be segmented into consumer products: art materials and stationary; food and fabric care; car products and adhesives and sealants; and specialty industrial products: industrial adhesives; industrial pigments; industrial and textile resins, leather chemicals, construction chemicals and other industrial chemicals
As of March’22 Pidilite has a market cap of $16.81 Billion. This makes Pidilite the world’s 1065th most valuable company by market cap according to our data. The market capitalization, commonly called market cap, is the total market value of a publicly traded company’s outstanding shares and is commonly used to measure how much a company is worth.
OBJECTIVE
To calculate beta of the company and find its significance
VIEWS by ICICI DIRECT
Q3FY22 Results:
Revenue came in better than our estimates but EBITDA margin pressure continues due to high raw material prices
• Revenues were up 24% YoY to ~| 2851 crore (up 9% QoQ)
• Gross margin fell 1117 bps YoY leading to fall in EBITDA margin by 19%
• PAT declined ~20% YoY to | 359 crore
What should investors do?
Pidilite’s share price has grown by ~3.5x over the past five years (from ~| 675 in February 2017 to ~| 2461 levels in January 2022).
• We maintain our HOLD rating on the stock Target Price and Valuation: We value Pidilite at | 2640, 75x P/E of FY24E EPS Key triggers for future price performance:
• The management is targeting the ‘core segment’ (i.e. adhesive, sealants) and ‘the growth’ segment to grow at 1-2x and 2-4x of GDP, respectively, in the long term
• Revival in the real estate business will be a key demand driver for C&B segment, going forward
• Addition of premium products in the portfolio such as Araldite, cost optimization measures will help drive EBITDA margin of the company.
DATA COLLECTION
Data of index and equity were collected from https://www1.nseindia.com/ and https://www.nseindia.com/ respectively. Daily returns from 1st March-2021 to 28 Feb-2022 were downloaded in excel format from these websites and it was sorted into weekly format. Then weekly returns were calculated for both index and equity and then regression analysis was done.
DATA ANALYSIS
Predicted Y = -1081.43016+ 0.2012128X
N=47,
R Square= 0.8141132,
F= 197.08293
T-stat (beta) = 14.0386228388623
T-stat (0.05,45)= 2.0141
The above regression equation tells us the relationship between X and Y. Where X is NIFTY’s weekly returns and Y is Pidilite Industries Ltd’s weekly returns.
The positive sign of Beta tells us the that there is a positive relationship between NIFTY and Pidilite Industries Ltd’s weekly returns.
From the equation, it can be seen that if X rises by 1 unit, Y will rise by 0.2012128 units.
T calculated is more that T tabulated which means, β is statistically significant at 5% confidence level.
R^2 is 0.8141132 which means 81% of Y (Pidilite Industries Ltd) is explained by X. And the balance is explained by error.
F is 197.08293 which is more than table value which means model is statistically significant at 5% level.
CONCLUSION
β is statistically significant in case of NIFTY and Pidilite Industries ltd. Also, it can be concluded that Reliance Industries ltd is a low beta share, since it is less than 1.