Buy PI Industries; target of Rs 4200: Sharekhan

Sharekhan's research report on PI Industries

Revenue/OPM of Rs. 1,770 crore/24.4%, up 31%/284 bps y-o-y substantially beat our estimate by 10%/147 bps led by robust growth in CSM/domestic business. PAT of Rs. 335 crore (up 46% y-o-y) was 21% above our estimate of Rs. 277 crore. CSM segment’s revenue grew by 29% y-o-y to Rs. 1,278 crores despite high base of last year supported by volume growth of 25% y-o-y and favourable pricing and currency impact of 4% y-o-y. Domestic revenue grew strongly by 36% y-o-y to Rs. 492 crores led by 31%/5% volume/price growth. New brands contributed significantly to domestic revenue growth. Management re-iterated its FY23 revenue growth guidance of over 20% but is conservative given global uncertainties. CSM order book rose sharply by 29% q-o-q to $1.8 bn. The domestic business outlook is promising led by product portfolio expansion and strong demand for existing products. We have increased our FY23-25 earnings estimate to factor higher revenue growth and margin.

Outlook

We maintain a Buy on PI Industries with a revised PT of Rs. 4,200 (reflects upward revision in earnings estimate). 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 37x its FY2024E EPS and 32.4x its FY2025E EPS.