Buy P.I. Industries; target of Rs 1278 Prabhudas Lilladher

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

PI's strong revenue growth of 29% was driven by new product commercialisation and ramp up in demand of existing products in the CSM segment (~39% rev growth in 4Q). Sizeable sustained capex guidance (Rs 4.0-4.5 bn p.a. for the next 2-3 years, business commitment for new products, increasing number of products moving from R&D stage to commercialisation and continued demand traction for existing products gives us comfort of superior earnings growth visibility for the next 2 years. On the domestic side, PI's outperformance vis-à-vis competitors is expected to continue. Domestic business is expected to get a boost with the launch of 2 potential-blockbuster products i.e. PB Rope L and Pyroxasulfone.

Outlook

We expect revenue/EBITDA/PAT to grow at a CAGR of 20%/27%/24% between FY19-21E. We have increased our FY21E revenue/EBITDA/APAT estimates by 2%/3%/3% & target multiple from 23x to 28x FY21E earnings driven by superior earnings growth visibility on the back of sustained business/revenue momentum. Maintain Buy rating with a target price of INR 1278 (Previous TP- 1023).