Earnings Update - PI Industries (PI IN) - Robust margins expansions - CSEC Research

Robust margins expansions

- PI Industries' revenue grew marginally by 3.7% YoY (+25.4% QoQ) to INR 6.3bn owing to the softness in the global markets and the challenges faced in the domestic markets on account of delayed and uneven distribution of rainfall coupled with lower pest infestation. CSM revenue stood at INR 4.3bn (+5% YoY). Domestic revenue remained muted at INR 1.96bn (+2% YoY).

- For the full year FY17, revenue increased 8% YoY to INR 23.8bn led by 11% increase in CSM revenues to INR 14.1bn while domestic business grew by 5% YoY to INR 9.7bn. EBITDA stood at INR 5.5bn (+28% YoY) as margins expanded 360bps YoY to 23.1%. PAT increased by 49%YoY to 4.5bn led by higher EBITDA, lower tax rate and lower interest cost.

Valuation: We are positive on the long-term fundamentals of the company, given its strong link with global innovators, strong product pipeline, comfortable order book position and capacity addition in the CSM business. At CMP of INR 812, the stock is trading at 23.8XFY18E and 20.2XFY19E earnings. We upgrade the stock to BUY rating (earlier an OUTPERFORMER) with target price of INR 1,005, valuing the stock at 25XFY19E.

Risks: Increasing competition in the herbicide product segment, which accounts 30% of domestic business. Pesticide demand is linked to monsoons and in years of poor monsoons demand goes down drastically. Genetically modified crops are made with inbuilt resistance towards pest that reduces the demand for agrochemicals.

Shares of P.I.INDUSTRIES LTD. was last trading in BSE at Rs.821 as compared to the previous close of Rs. 810.85. The total number of shares traded during the day was 6314 in over 347 trades.

The stock hit an intraday high of Rs. 827.85 and intraday low of 813. The net turnover during the day was Rs. 5181292.

Source : Equity Bulls

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