Sharekhan's research report on PI Industries
PI’s CSM order book has witnessed robust 29% growth to $1.8 bn and new molecule commercialisation remain strong with a target of seven new molecules for FY23 post record 9 new commercialised in FY22. We expect a robust 22% revenue CAGR in the CSM segment over FY22-25E with the possibility of growth acceleration with likely launch of non-agrochemical products. The potential successful acquisition of a pharmaceutical company to provide access to technology, customers, regulator-approved products/assets. The company’s target of pharma revenue share of 20-25% hints towards sustained high growth prospects in the CSM business apart from revenue/earnings diversification. FY23 revenue growth guidance of over 20% seems conservative to us and have upside potential as H2 is relatively strong for CSM business and strong the Rabi season demand would drive high growth for domestic formulation business. We highlight here that H1FY23 CSM/Domestic revenue growth was very strong at 34%/19% y-o-y supported by high volume growth/price hikes.
We maintain a Buy rating on PI Industries with an unchanged PT of Rs. 4,200. A potential acquisition in the pharma space would improve long-term earnings growth outlook and makes us constructive on the stock. At CMP, stock trades at 36.2x its FY2024E EPS and 31.7x its FY2025E EPS.
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