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Recommendations India

PI Industries Q3FY14 results update

February 18, 2014, Tuesday, 11:04 GMT | 06:04 EST | 15:34 IST | 18:04 SGT
Contributed by Nirmal Bang

PI Industries posted yet another strong quarter with 28.6% growth in sales. EBITDA margins have improved by ~130 bps yoy to 17.3% on back of favorable product mix and good rabi season. Management has maintained its upgraded growth guidance of 40% for full year and 25-30% for FY15.

Key Highlights

- CSM: key highlight of the quarter was increase in order book to $365mn from $334 mn in Q2FY14 despite reporting strong growth of 36% yoy at Rs 234 cr, maintaining quarterly run rate of more than Rs 200 cr. the company has commercialized one product in Q3FY14 and likely to one more in Q4FY14. PII reported Rs 90 cr sales from Jambusar plant in 9MFY14 and expected to end the year with around Rs 120 cr (higher than its earlier guidance of Rs 100 cr however in-line with expectations). The company has informed that Jambusar plant has achieved break even and has already started the Phase II expansion which is expected to operational by Q1FY15. It is likely to commercialize three more products during FY15E, driving the growth further

- Agri: On the back of good monsoon and good reservoir levels, maintenance of high MSPs, PI industries’ Agri segment has reported decent sales growth of 17.3%. The performance is attributed mainly to volume growth. The company expects to launch 1 product in Q4FY14. It has strong pipeline of 8- 9 products of exclusive products and intends to launch 1-2 products every year.

- PI Industries has strong balance sheet with less than 0.15x Debt: Equity ratio and NWC of 58 days at the end of 9MFY14 (as compared to 83.5 days at the end of 9MFY13).

Valuation & Recommendation

We believe that with macro factors like low per-capita pesticides consumption in the country, increasing MSPs and increasing acceptance for the need of crop protection products, make PI Industries a good long term bet while healthy order book of CSM, strong balance sheet and new product launches in Agri Input segment will drive near to medium term growth. We continue to maintain our positive stance on the stock. At CMP, the stock is trading at 12.7x on FY15E earnings. We recommend to HOLD and BUY on decline for the price target of Rs 269 (14x on FY15E EPS)