Buy PI Industries; target of Rs 944: Edelweiss

Edelweiss' research report on PI Industries

Domestic revenue grew 13% (H1FY18: down 5% YoY) bolstered by post GST demand and launch of new products. According to management, Nominee Gold’s performance was in line with expectation; despite heightened competition, which impacted pricing, the product’s revenue grew YoY driven by higher volumes. During the quarter, PI launched 2 new products: Humesol and Visma and plans to launch 5 products in FY18. Post a subdued Q1FY18, growth picked up in Q2FY18 and management maintained 10% FY18 growth guidance in domestic segment.

Outlook

Despite the muted performance in H1FY18, PI maintained its growth guidance for CSM and domestic businesses at 10% each. Given the visibility on CSM and improved domestic performance (Nominee Gold also stable), we maintain our revenue estimates. However, we revise down EBITDA margin on weak performance in H1FY18, leading to 6% and 2% cut in FY18E and FY19E EPS, respectively. We maintain our FY19E target P/E at 25.0x, leading to target price of INR 944. We maintain ‘BUY’.