Buy P.I. Industries; target of Rs 1023: Prabhudas Lilladher

Prabhudas Lilladher's research report on P.I. Industries

PI Ind's robust 31.6% YoY topline growth was primarily driven by the CSM segment which grew 40.2% YoY led by significant improvement in demand, commendable scale up of operations and conversion of enquiries into actual business transaction. After commissioning a plant in Q3, the company is set to commence another plant in the next quarter and has started construction of 2 multipurpose plants (asset turns of ~1.6; Capex of Rs 3.0-3.5 bn/yr in FY20 and FY21). PI Industries is all set to make a comeback (revenue CAGR of 21.0% between FY18-21E) driven by both domestic (~39% of revenues) and CSM business (61% of revenues). Domestic business is expected to get a boost with the launch of 2 potential-blockbuster products i.e. PB Rope L and Pyroxasulfone. Commercialization of new molecules, production ramp up led by debottlenecking of capacity and commencement of production at its new plant is expected to aid PI in clocking +20% CAGR in CSM business in FY19-21E. We estimate PAT CAGR of 18.7% over FY18-21. Continuous investments in capacity creations for plants, R&D facilities and intellectual capital gives us confidence and superior growth visibility for the next 2-3 years. We have upgraded FY19/FY20/FY21 revenue (by 3.3%/3.4%/6.2%), EBITDA (by 8.8%/9.8%/1.2%) and APAT (by 10.6%/11.9%/10.8%).

Outlook

We upgrade PI to BUY (from Accumulate) with revised target price of Rs 1023 based on 23.0x FY21 earnings.