ADAPTING AN INVIGORATING FORMULA
HERE IS WHY
☛Strong growth prospects.
☛Potential acquisition benefits.
☛Good past financial performance.
PI Industries currently operates in the domestic agricultural inputs and custom synthesis and contract manufacturing (CSM) segments. It is a leading player in the domestic agricultural inputs sector, primarily dealing in agrochemicals and plant nutrients. In the CSM segment, its business interests include dealing in custom synthesis and contract manufacturing of chemicals. This constitutes techno-commercial evaluation of chemical processes, process development, lab and pilot scale-up as well as commercial production. Considering that manufacturing of crop protection products has been exempted from lockdown, the company will see revenue and healthy numbers even in FY21.
In December 2019, PI Industries completed the acquisition of Isagro (Asia) Agrochemicals Private Limited. The acquisition provides PI access to additional manufacturing capacities to meet growing demand and also strengthen its position in the domestic market by leveraging complementary product portfolio and distribution channel of IAPL. PI Industries is also expected to benefit from synergy benefits of adjacent manufacturing site while de-risking the supply chain of a few products. Going ahead this acquisition will add to the top-line.
The CSM export segment provides healthy revenue and stable profitability. PI Group is one of the pioneers of CSM in the agrochemical space in India. It has built a strong reputation based on its sound research capabilities. The clientele includes some of the largest agrochemical innovator companies in the world. The group has invested significantly in enhancing manufacturing capacities over the past five years.
With the growth in population in India, there is a rise in production of crops, which in turn enhances demand for agrochemicals. The company has shown good growth in sales, PBITD and PAT in the last three years. Gross sales have increased by 20.76 per cent CAGR from FY18 to FY20. PBITD and PAT also saw a growth of 20.59 per cent and 11.35 per cent in this period. Thus, the company has posted noteworthy past performance and growth visibility due to acquisition and a growing market.
For the quarter ended March 2020, the company’s gross sales increased 6.26 per cent to Rs 855.20 crore in Q4FY20 from Rs 804.80 crore in Q4FY19. Total expenditure for Q4FY20 stood at Rs 668.90 crore as against Rs 631.30 crore in Q4FY19, showing an increase of 5.96 per cent. PBIDT, excluding other income, showed an increase of 7.38 per cent to Rs 186.30 crore in Q4FY20 from Rs 173.50 crore in the same quarter last year. PBIDT margin, excluding other income, for Q4FY20 stood at 21.78 per cent as against 21.56 per cent in the same quarter last year.
PAT for Q4FY20 stood at Rs 109.90 crore as against Rs 125.70 crore in the same quarter last year, showing a decrease of 12.57 per cent. PAT margin for Q4FY20 stood at 12.85 per cent as against 15.62 per cent in the same quarter last year. The stock is trading at a PE multiple of 58x. ROCE for FY20 stood at 25.10 per cent. The company has shown increase in sales and profit over the last three years along with consistent margin (PBIDTM and PATM).