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Chola Securities
PI Industries (Outperformer)
CMP: ₹1,599
Target: ₹1,770
Revenue grew by 6.3 per cent y-o-y (0.6 per cent q-o-q) to ₹850 crore mainly impacted by the Covid-19 disruption coupled with lower other income (down 69 per cent y-o-y).
Both domestic and CSM businesses continued to do well with a) robust demand for key existing molecules (Bispyribac Sodium, Osheen, etc); b) new product launches; and c) entry into pharma value chain; d) new client additions; e) ramp up of molecules and facilities commercialisation in FY20
EBITDA margin was at 21.8 per cent, a decline of 50 bps, due to lower revenue growth. The reported EBITDA stood at ₹186 crore, about 5 per cent below consensus estimates.
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. Currently, PI is trading at about 39.1xFY21E and 31.2xFY22E earnings. We revise our rating on the stock to an ‘outperformer’. from a ‘market performer’.
Risks: Slowdown in demand in the global/ domestic agrochemicals space due to adverse climate, excess unsold inventory, adverse commodity prices, and sharp technological, economic, and political shifts.
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