Buy PI Industries; target of Rs 4450: Motilal Oswal

Motilal Oswal is bullish on PI Industries recommended buy rating on the stock with a target price of Rs 4450 in its research report dated May 03, 2023.

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May 04, 2023 / 23:44 IST

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Motilal Oswal's research report on PI Industries

PI Industries (PI) has accelerated its journey into the pharma space through two major acquisitions: 1) Therachem Research Medilab LLC’s (TRM) wholly owned Indian subsidiary and US based assets, and 2) Italy-based Archimica Spa. TRM and Archimica are engaged in CRDMO (contract research, development and manufacturing organization) of chemical compounds, which are ultimately used for the manufacturing of API (active pharmaceutical ingredients) and other pharmaceutical products. PI will benefit from the global presence, R&D capabilities and global clientele of acquired companies and could quickly leverage its knowledge in process chemistry and its operating efficiency to expand into the pharma space. The integration of this business is margin accretive and will be quickly scaled up (double in three to four years) with some capex and better capacity utilization. Factoring in the acquisition, we increase our earnings estimates for FY24/FY25 by 12% each. We expect a revenue/EBITDA/PAT CAGR of 25%/26%/24% over FY23-25.

Outlook

Factoring in the acquisition, we increase our earnings estimates for FY24/FY25 by 12% each. We expect a revenue/EBITDA/PAT CAGR of 25%/26%/24% over FY23–25. We value the stock at 35x FY25E EPS to arrive at a TP of INR4,450. Maintain BUY.

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