14 August 2017
1QFY18 Results Update | Sector: Fertilizers
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Growth to normalize post recovery in global agchem market
GST transition disrupts growth:
PI’s overall revenue fell 14.4% YoY to
INR5,848m (est. of INR7,517m) in 1QFY18. EBITDA margin shrunk 190bp YoY to
22.3% (est. of 25%), led by higher other expenses (+300bp YoY) and employee
cost (+210bp). EBITDA declined 21% YoY to INR1,304m. Consequently, adj. PAT
fell 21% YoY to INR1,001m (est. of INR1,283m).
Soft product uptake; demand to normalize in 2HFY18:
deferment in product uptake, despite better monsoon and higher major crop
acreages, on account of GST transition. Domestic revenue declined 17% YoY to
INR2,848m, while exports fell 12% YoY to INR3,000m. PI, however, expects the
global companies to pump up their inventory in 2HFY18 as the global agchem
market recovers, normalizing exports. The company continues investing in R&D
capabilities to drive new product introductions, keeping itself ready for any
normalization in growth momentum.
Product pipeline stands strong:
PI is well on track with its new products, as
witnessed by the launch of ‘ELITE’, a maize herbicide, in partnership with BASF.
The company also introduced two rice fungicides – ‘HEADER’ and ‘FENDER’ –
and is expected to launch two more products in FY18. PI is set to leverage its
collaborations and JVs to further strengthen its product pipeline, allowing
better execution of its order book (stands at USD1b) to garner more share in
Valuation and view:
We believe PI is well placed to leverage the turnaround in
the global agchem scenario on the back of continued investment in R&D and a
strong product pipeline. However, with global demand picking up only in
2HFY18, we cut our earnings estimates by 9%/5% for FY18/FY19. We maintain
rating with a TP of INR894, 25x FY19E EPS.
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg. Val, INRm
Free float (%)
94.8 / 1.5
950 / 674
Financials & Valuations (INR b)
2017 2018E 2019E
118.3 142.0 169.8
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Niket Shah – Research Analyst
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Aksh Vashishth – Research Analyst
(Aksh.Vashishth@MotilalOswal.com); +91 22 6129 1553