Buy P.I. Industries; target of Rs 4560: Prabhudas Lilladher

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

PI Industries (PI) 4QFY23 results were lower than our and consensus estimates with Revenue/EBITDA/PAT growth of 12%/12%/37% YoY (PLe 20%/30%/47% YoY) given subdued demand environment in both the domestic and exports segment. CSM revenue grew 15% YoY to Rs12.8bn (PLe Rs13.9bn; Volume/price growth of -2%/+17% YoY), while domestic revenue grew merely 1% YoY to Rs2.84bn (PLe Rs2.83bn led by volume/price growth of +2%/-1% YoY). Gross margins improvement of 70bps YoY to 44.8% was mitigated by higher employee and other expenses up 40bps/30bps YoY resulting into flat EBITDA margins at 21.9% YoY (PLe23.9%). CSM order book position stood at USD1.8bn (+29% YoY and flat sequentially) largely towards agri portfolio led by increased demand for some existing molecules. Citing robust demand momentum, PI continues to guide revenue growth of 18-20% YoY along with consistent margin improvement primarily driven by strong enquiries in CSM business and new launches in domestic segment. The twin pharma acquisition announced recently (in april’23) is also anticipated to support overall growth.

Outlook

We broadly maintain our EPS estimates factoring in company’s robust performance and expect Revenue/PAT CAGR of 21%/19% (FY11-23, 20%/28%) over FY23-25E. Maintain ‘BUY’ with revised TP of Rs4,550 (earlier Rs4,530) based on 40xFY25 EPS.

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