Stock Report

P I Industries - Management Meet Update - Confident to achieve growth guidance - BUY

Posted On : 2022-06-24 12:59:49( TIMEZONE : IST )

Mr. Himanshu Binani - Research Analyst at Prabhudas Lilladher Pvt. Ltd.

Quick Pointers:

- Confident on achieving growth guidance of 18-20% in FY23.

- Pharma acquisition still in evaluation stage; to be completed in next 3-4 quarters.

We interacted with senior management of PI Industries (PI) to take an update on the business and outlook ahead. Key highlights: (a) The company remains confident on achieving growth guidance of 18-20% YoY for FY23 in both exports and domestic segment (supported by lower base of last year); (b) remunerative commodity prices bode well for domestic market; (c) delayed monsoons have an impact on placements; however, remains hopeful of monsoon revival; (d) to launch 5-6 products in domestic market in FY23; (e) CSM business continues to be the shop stopper with mix changing to 80:20 for Agri and non-agri, going forward; (f) Pharma acquisition still in evaluation stages; likely to be done in next couple of quarters.

Going forward, PI remains confident on the core business and its growth guidance with margins likely to improve from current levels, primarily led by strong enquiries in CSM business and new launches in domestic segment. We believe, the stock has corrected ~35% from its recent highs, thus providing a good entry point with strong earnings visibility in its core business. We broadly maintain FY23/FY24 EPS. We expect PI to report revenue/PAT CAGR of 18%/ 23% (FY11-22, 20%/26%) over FY22-24E. Maintain 'BUY' with unchanged TP of INR3,340 based on 40xFY24 EPS.

CSM to continue as the show stopper: CSM order book stood at USD1.4bn as on Mar-22. PI commercialized 9 new molecules during FY22, while 6-7 more products are planned to be commercialized in FY23. PI has more than 40 products at different stages of scale up in the CSM segment. Further, R&D pipeline has more than 20% products from non-agrochemical segment.

Delayed monsoons impacting placements in domestic market: 1Q generally happens to be placement season; while actual consumption takes place in 2Q for domestic agrochemicals industry. However, due to delayed monsoons there has been certainly some impact in terms of product placements. Additionally, competition has aggressively placed few molecules in the market in 4QFY22; leaving limited room for further inventory push. Going forward, the company remains confident of decent performance in domestic business primarily led by a) expectations of better acreages across crops and b) remunerative crop prices. PI has been aggressively pursuing horticulture under 'Jivagro' brand- launched 13 new products in FY22; while 5 new innovative products are to be launched in FY23 which will support segment's growth.

Shares of PI Industries Limited was last trading in BSE at Rs. 2522.50 as compared to the previous close of Rs. 2488.25. The total number of shares traded during the day was 7064 in over 1179 trades.

The stock hit an intraday high of Rs. 2562.25 and intraday low of 2488.70. The net turnover during the day was Rs. 17880497.00.