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P I Industries Ltd>
  • CMP : 3,252.3 Chg : 7.0 (0.22%)
  • Target : 3,710.0 (15.94%)
  • Target Period : 12 Month

05 Aug 2022

Stellar numbers propelled by CSM…

About The Stock

Incorporated in 1947, PI Industries focuses on complex chemistry solutions in agri and pharma sciences.

  • The company maintains a strong research presence through its R&D facility in Udaipur, where it has a dedicated team of over 300 scientists
  • The revenues of the company can be subdivided into custom synthesis manufacturing (CSM) and domestic agrochem formulation business with the former contributing ~74% to overall revenue in FY22 and the rest coming from the domestic formulations business
Q4FY22 Results

Numbers were above our estimates, led by strong growth from CSM.

  • Reported revenue growth of 29% YoY to ₹ 1543.2 crore, CSM (up 42% YoY). The revenue from domestic formulation was up 4% YoY to ₹ 401.1 crore
  • Gross margins remained constant at ~43.8% while EBITDA margin expanded 150 bps YoY to 22.4%
  • EBITDA was up 39% YoY to ₹ 345.6 crore
  • PAT increased 40% YoY to ₹ 262.4 crore, driven by strong operational efficiency
What should Investors do?

The stock appreciated at 24% CAGR in last three years.

We retain BUY on the back of better growth outlook of CSM business

Target Price Valuation

We value PI Industries at 45x FY24E EPS to arrive at a revised target price of ₹ 3710/share (earlier ₹ 3155/share).

Key Triggers for future price performance
  • Strong order backlog in CSM bodes well for future growth
  • Proposed foray into pharma CDMO could expand revenue visibility further and diversify its revenue stream, to a certain extent
  • Improvement in the operational performance owing to higher share of value added business portfolio to aid return ratios further
Alternate Stock Ideas

Apart from PI Industries, in our chemical coverage, we also like Neogen Chemical.

  • Trigger for Neogen Chemical’s future revenue growth would be increasing CRAMS opportunity
  • BUY with a target price of ₹ 1870

Key Financial Summary

Particulars FY19 FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E 2 Year CAGR (FY22-FY24E)
Net Revenue 2,840.9 3,366.5 4,577.0 5,299.5 18.4 6,293.9 7,372.0 17.9
EBITDA 576.4 717.8 1,012.2 1,142.4 15.6 1,378.4 1,666.1 20.8
EBITDA Margins (%) 20.3 21.3 22.1 21.6 - 21.9 22.6 -
Adj.PAT 410.2 456.6 738.3 843.8 12.9 1,022.0 1,253.0 21.9
Adj. EPS (₹) 29.7 33.1 48.6 55.5 - 67.2 82.4 -
EV/EBITDA 76.3 61.9 46.1 40.8 - 34.2 27.8 -
P/E 107.7 96.7 65.9 57.6 - 47.6 38.8 -
ROE (%) 17.9 17.4 13.8 13.8 - 14.5 15.2 -
ROCE (%) 23.7 20.1 17.0 16.3 - 17.1 18.2 -
Source: Company, ICICI Direct Research

Disclaimer

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