6 August 2020
1QFY21 Results Update | Sector: Agri
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TP: INR2,342 (+15%)
Domestic biz drives growth
Valuations capture entry into Pharma value chain
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
EPS Gr. (%)
Div Yield (%)
FCF Yield (%)
308.9 / 3.8
2053 / 974
PI Industries (PI) reported strong performance, led by growth in the
Domestic business (+76% YoY); growth was further aided by 23% revenue
growth in Custom Synthesis and Manufacturing (CSM). Operating leverage
led to EBITDA margin expansion, partially offset by lower gross margins,
weighed by higher share of Isagro and product mix changes.
Factoring better-than-expected performance during the quarter, we increase
our diluted EPS est. by 9%/8% for FY21/FY22. We value the stock at 35x FY22E
EPS to arrive at TP of INR2,342, implying 15% upside. Maintain
1QFY21 revenue was up 41% YoY (incl. Isagro’s performance, which was
absent in the base quarter) to INR10.6b (est.: INR9.2b). EBITDA was up 50%
YoY to INR2.3b (est.: INR1.9b); EBITDA margins expanded 140bp YoY to
21.6% (est.: 20.2%), supported by operating leverage. The gross margin
contracted 280bp to 42% due to Isagro’s contribution to sales and a change
in the product mix. Adj. PAT grew 43% YoY to INR1,455m (est.: INR1,133m);
PAT growth was restricted, weighed by an increase in depreciation (up 45%
YoY), increase in interest cost (up 4.2x YoY), and lower other income (down
1QFY21 exports/CSM revenue increased ~23% YoY (to INR6.1b) on proactive
raw material inventory management and capacity planning. Demand for key
commercialized molecules remains strong. Isagro exports stood at INR300m
during the quarter; excluding the same, revenue grew 17% YoY (to INR5.8b).
Revenue for Domestic Agrochemicals grew 76% YoY (to INR4.5b), supported
by: (a) carryover demand from 4QFY20 (INR850-900m deferred revenue, of
which INR700–750m is realized in 1QFY21), (b) Isagro brand sales
(INR690m), and (c) robust momentum in the Domestic segment on account
of planned brand positioning to avail the advantage of early sowing.
Excluding Isagro, Domestic sales revenue increased 49% YoY (to INR3.8b)
and 21% YoY (to INR3.1b) excluding Isagro + INR700m of carryover demand
from 4QFY20. During the quarter, the highest ever placement of Nominee
Gold was witnessed.
The order book stood at ~USD1.5b (flat QoQ), which provides high visibility
for sustainable growth over the next three to five years.
During the quarter, the company scaled up and undertook the supply of
pharma intermediates for COVID-19.
The company has guided for 20%+ revenue growth (in both Domestic as well
as CSM) in FY21 and FY22 (including the Isagro acquisition).
The Domestic Agrochemicals industry is expected to grow at 10–15% in
FY21, which is higher than growth posted by the industry in the last three
years. PI expects its Domestic business to grow 20%+ in FY21.
Operating leverage more than offsets gross margin contraction
Shareholding pattern (%)
Jun-20 Mar-20 Jun-19
Highlights from management commentary
Note: FII includes depository receipts
Research Analyst: Sumant Kumar
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.