Accumulate PI Industries; target of Rs 2317: Dolat Capital

Dolat Capital's research report on PI Industries

ISAGRO’s acquisition, a Rs 20.0bn QIP – a prelude to inorganic growth, 22 patent applications, a USD 1.5bn CSM order book, introduction of an intermediate used in COVID-19 drug and commissioning of 2 new multiproduct plants, 2 new products in CSM and 3 new products in the domestic business have been new feathers in the cap for PI Industries during FY20. PI Industries’ foray into pharmaceuticals has been a manifestation of their perseverance. PI Industries’ FY20 annual report speaks vividly of finding adjacencies beyond agro-chemicals and to be able to find their feet in knowledge chemistries. The company has been consistently investing in R&D (3.5% of sales: Rs 115mn) to build a robust pipeline of novel molecules (closed FY20 with 60 molecules in the pipeline) and endeavours developing next generation, technology and processes. PI Industries has had a penchant for setting foot in advanced chemistries (as mentioned in previous annual reports) like fluorination, phosgenation, carboxylation and that now, makes more sense – the company completed work on setting up facility to undertake fluorination chemical synthesis and initiated process development of a few molecules. The company’s vision of CHEMISTRY 4.0, enabled deployment of new analytical tools to improve process efficiencies. We believe that PI Industries is at the cusp of being seen as a diversified chemical company and paving ways into pharmaceuticals, fine chemicals, knowledge chemicals augurs well for shareholders.

Outlook

We like PI Industries moat in agro-chemicals and contract manufacturing and value PI Industries at 45.0x FY22E EPS of Rs 51.5, and revise our target price and rating to Rs 2,317/share, accumulate.