PI Industries Ltd. share price target

Sector: Agrichemical /Small-Cap | Earnings Update 1QFY20 Background: PI Industries' is one of the leading players in the Crop protection industry. Company largely operates under two main segments a) agriculture inputs, b) custom synthesis and contract manufacturing. Company has a niche portfolio of 45 products, which includes 5 in-licensed products and 7 co-marketing products in tie up with MNCs such as Bayer, BASF & Kumiai chemicals. Company currently operates three manufacturing sites in Gujarat, having three formulation units and 8 multiproduct plants for manufacturing, active ingredients and intermediates. PI has a strong distribution network of 10,000 dealers / distributors; 40,000 retailers and 30 stock points....

Beat on revenue; EBITDA/PAT in-line: Revenue increased 25% YoY to INR7.5b (our estimate: INR7.1b) in 1QFY20. EBITDA grew 28% YoY to INR1.5b (our estimate: INR1.4b), with the margin expanding 60bp YoY to 20.1% (our estimate: 19.9%). Adj. PAT was up 23% YoY to INR1b (in-line). Product mix change dents gross margin: CSM revenue grew 59% YoY, led by increased requirement for commercialized molecules and addition of a new molecule (was commercialized during the quarter). Domestic revenue declined 13% YoY owing to erratic/delayed advent of the south-west...

Strong results, ahead of estimates: PI Industries continued to deliver strong results with revenue, EBITDA and PAT registering robust growth of 24.5%, 28.4% and 23.6% y-o-y, respectively, in Q1FY2020. The improved performance was been led by a 59% y-o-y growth in the exports business as domestic business declined by 13% y-o-y. The management guided that the growth in exports is quite steep and hence might not sustain. However, it stated that a growth of 2025% is achievable on a sustainable basis for the next 3-5 years. The management reiterated its guidance for revenue growth of more than...

PI Industries's (PI) results and management commentary on future outlook indicates robust business momentum and clear growth visibility for 2-3 years, despite gloomy agchem environment globally and negative business outlook from one of its key clients. Sizeable sustained capex guidance (Rs4.0-4.5bn p.a. for the next 2-3 years) for investment in 4 new plants (2 in FY20 & FY21 each), increasing number of products moving from R&D; stage to commercialisation and continued demand traction for existing products gives us comfort of superior earnings growth visibility for the next 2 years....

Sector: Agrichemical /Small-Cap | Earnings Update 4QFY19 Background: PI Industries' is one of the leading players in the Crop protection industry. Company largely operates under two main segments a) agriculture inputs, b) custom synthesis and contract manufacturing. Company has a niche portfolio of 45 products, which includes 5 in-licensed products and 7 co-marketing products in tie up with MNCs such as Bayer, BASF & Kumiai chemicals. Company currently operates three manufacturing sites in Gujarat, having three formulation units and 8 multiproduct plants for manufacturing, active ingredients and intermediates. PI has a strong distribution network of 10,000 dealers / distributors; 40,000 retailers and 30 stock points....

account of i) lower channel inventory levels as compared to previous years, ii) demand offtake seems to be healthy in various geographies on account of favourable climatic conditions, and iii) innovators seem to have started focusing on developing and introducing new molecules and products after a gap of 2-3 years, as they were involved in large M&A; activities and integration...

PAT grew 9% YoY to INR2,834m. CSM business delivered robust growth of 40% YoY, backed by higher demand due to an improvement in global sentiment. Domestic business performance was notable in that it grew by 10% YoY, despite facing headwinds in the form of erratic rainfall in key states and poor price realization for key crops, which impacted demand and led to higher inventory levels. We expect it to meet its FY19 guidance of ~20% revenue growth on the back of the improved global scenario and strong support from its newly launched products. Factoring in the strong beat on our 3QFY19 estimates, we raise our FY19 earnings estimate by 8% while keeping FY20/21 estimates unchanged. We expect revenue/PAT CAGR of 19%/17% over FY18-21. We value the stock at 24x FY21E EPS (in-line with its five-year average trading multiple), which is justified as the company has shown strong signs of returning to its robust growth cycle post three muted years.

We project revenue/PAT to grow at 20%/19% CAGR over FY18-20E owing to continued traction in commercialisation of molecules, scale-up of exports, healthy R&D; pipeline, additional capacity with the commissioning of new plants and robust order book position Hence, we continue to maintain our positive stance on the stock and recommend...