Buy PI Industries; target of Rs 985: Cholamandalam Securities

Cholamandalam Securities' research report on PI Industries

Revenue grew by 9.5% YoY (-3.1% QoQ) at INR 6,056mn. In 1QFY19, company has adapted IND AS 115 and changed the revenue recognition principle from “transfer of risk & reward” to “transfer of control”, as the changes were made prospectively in the P&L, the numbers are not comparable. Domestic agri inputs revenue grew 23% YoY to INR 2.91bn; on reported basis, CSM business was flat at INR 3.15bn; due to AS 115, the deferred shipment of CSM from 4QFY18 to the tune of INR 740mn was not recognized as revenue in 1QFY19, rather the profit to the tune of INR 216mn from the aforementioned deferred shipment got directly transferred to the retained earnings.

Outlook

We are positive on the long term fundamentals of the company, given its strong link with global innovators, strong product pipeline, comfortable order book position and capacity addition in the CSM business. At CMP of INR 784, the stock is trading at 24.9XFY19E and 20.7XFY20E earnings. We are valuing the company 26XFY20E EPS to arrive at a target price of INR 985 and maintain BUY rating.