Markets

Broker's call: PI Industries (Buy)

| Updated on September 20, 2019 Published on September 21, 2019

Emkay Global

PI Industries (Buy)

CMP: ₹1,450

Target: ₹1,241

We increase PI Industries’ target price to ₹1,450 from ₹1,305 and turn overweight in sector EAP from marginal UW, factoring in faster execution of Custom Synthesis & Manufacturing (CSM) order book in the wake of Isagro (Asia) Agrochemicals Pvt Ltd (IAPL) acquisition.

We also raise our FY21E revenue/EBITDA/PAT by 6 per cent/16 per cent/11 per cent as we take into account the ramp-up of IAPL’s under-utilised capacity. PI Industries had earlier guided for double-digit revenue growth, driven by growth in its CSM business.

IAPL’s overall revenues declined at a CAGR of 3.9 per cent over FY15-18 as its domestic business lagged industry growth due to lack of pan-India presence and growing competition in generics. Exports to parent Isagro SpA, Italy, also fell 53 per cent over FY16-18.

We continue to value the stock at 28x FY21E EPS (5-year/10-year average: 29.7x/22.3x) due to: a) strong order book visibility (2.7x FY20E revenues); b) industry-leading revenue growth; and c) strong OCF generation to fund capex. Reiterate BUY.

Published on September 21, 2019
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