Buy PI Industries; target of Rs 4400: Sharekhan

Sharekhan's research report on PI Industries

PI Industries has offered to acquire UK based listed company Plant Health Care Plc (PHC) for a sum of £32.8 million which is in the agriculture biological space. It has experience in protein/peptide technology. PHC has a presence in key markets like USA, Brazil, Europe and Mexico. It had a revenue of $11 million in CY23 and a 60% gross margin. It is reporting losses currently. Revenue of the company is expected to grow fast as the biologics industry is expected to grow at 13% CAGR till FY28. Company’s revenue YTDCY24 is up 72% y-o-y. The offered purchase consideration of ~£ 32.8 Mn is proposed to be paid in cash and funded from the earlier Qualified Institutional Placement (QIP) proceeds. The acquisition is expected to close by Q2FY25. The acquisition is small as compared to PI Industries scale (1.3% of revenue) but it will be a good addition to its fast growing biologics business. We are not incorporating the acquisition’s numbers at this point of time as it remains to be seen how it gets integrated.

Outlook

We maintain our Buy rating on PI Industries with a PT of Rs. 4,400. Growth in the company will be led by new products in CSM business and improving prospects in the domestic and pharma business.