Buy PI Industries; target of Rs 605: Nirmal Bang

Nirmal Bang is bullish on PI Industries and has recommended buy rating on the stock with a target of Rs 605 in its June 4, 2012 research report.

“PI Industries reported results in-line with our expectations. Revenues for Q4FY12 came at Rs 235.3 cr against our expectation of Rs 226.7, registering a growth of 10.7% yoy (~23% growth excluding discontinues Polymer business). Custom Synthesis Manufacturing (CSM) was the star performer for the quarter which grew by ~55% yoy at Rs 131 cr. Agri business was lackluster due to adverse agro-climatic conditions, low pest attack etc.  Management has maintained its growth outlook of 30-35% for FY13 on the back of strong demand in recently launched products, new scheduled launches, benefit of price hike taken in Q4FY12 and commissioning of Jambusar plant.”
 
“Margins were under pressure during the quarter due to rise in input cost and lower demand in agri business leading to adverse product mix. EBITDA margins were 15.9% in Q4FY12 as compared to 17.4% in Q4FY11 and 15.7% in Q3FY12. Management expects margins to improve in future. CSM order book stands at ~$300 mn i.e. 4.4 times of FY12 CSM revenues, providing revenue visibility for the segment. The company has launched two new products in Q4FY12 – one fungicide and one insecticide. It has planned three more product launches in FY13. Together these products would drive the growth for the company in coming years. PI Industries has give the co-marketing rights of its blockbuster product – Nominee Gold with five other players. Under the agreement PI would solely manufacture the product and would supply it to other players.”

“We believe that with its unique business model and concentration on the higher pie of the value chain, PI Industries is at the right juncture to enjoy the fruits of its investments done till now. We find prospects of the company promising with factors like recognized player in the CSM segment, strong order book with increasing margins, low per-capita consumption of pesticides that provides opportunities for growth, increased demand for food grains and the rising awareness about crop protection usage among the farming community. At CMP the stock trades at 10.3x FY13E and 7.4x FY14E. We believe the stock is available at attractive valuations. Based on our EPS of Rs 46.6 for FY13E, target price comes to Rs 605, potential upside of 26% from current levels. We maintain our BUY rating on the stock,” says Nirmal Bang research report. 

Institutional holding more than 40% in Indian cos

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