Buy PI Industries; target of Rs 1765: Emkay Global Financial

Emkay Global Financial's report on PI Industries

PI's Q4 revenue increased 6% yoy on the back of Isagro acquisition. Comparable revenues stood flat yoy. Comparable domestic revenues decreased 25% yoy due to the deferment of Rs1bn in sales to Q1FY21 due to shutdown. Adjusted for same, domestic revenues increased 26% yoy, marking 2nd consecutive quarter of high growth. PI has rationalized its product portfolio in the domestic business by exiting tail products and improving focus on specialty products. As a result, Q4 gross margins improved 106bps yoy. EBITDA margins improved lower at 23bps yoy due to plant shutdown costs. Comparable exports increased 7% yoy despite the shutdown of one plant due to fire on 6th Jan and Covid-19 shutdown for last 8-10 days in March. Overall exports increased 12% yoy due to Isagro acquisition.

Outlook

PI's robust order book of USD1.5bn (3.6x FY21E revenues) and turnaround in the domestic business offer comfort and justifies industry-leading P/E valuations of 26.5x/22.4x for FY22/FY23E. We maintain Buy with a revised TP of Rs1,765 (28x Jun-21E EPS).

PI Industries 09062020