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Recommendations India

PI Industries Q4FY14 results update

May 29, 2014, Thursday, 14:52 GMT | 09:52 EST | 19:22 IST | 21:52 SGT
Contributed by Nirmal Bang

PI Industries posted decent quarter with 9.8% growth in sales for the quarter and 38.6% for FY14. Post adjusting one-time expenses (impairment of fixed assets and provisioning for bad debts and slow moving inventory amounting to around Rs 11 cr) EBITDA margins have improved by ~460 bps yoy to 17.1% on back of favorable product mix. Management has indicated sales growth of 25% for next two years with stable margins.

Key Highlights

- CSM: Key highlight of the quarter was increase in order book to $395mn from $365 mn in Q3FY14 despite clocking revenues of Rs 235 cr for Q4FY14, CSM segment grew by 55% to Rs 925 cr. The company has commercialized three products in FY14 and likely commercializes three more in FY15. PII reported Rs 120 cr sales from Jambusar plant in FY14 and expected to take it forward to Rs 140-150 crin FY15. The company in process of expansion of Phase II at Jambusar plant which is expected to operational in 2HFY15. Management has guided for 25% growth for FY15.

- Agri: On the back of reservoir levels and higher MSPs, PI industries’ Agri segment has reported healthy sales growth of 20.5% and sales of Rs 127 cr for the quarter. For FY14, domestic segment reported revenues of Rs 662 cr, a growth of 20%. The performance is attributed mainly to volume growth (15-16%). It has strong pipeline of 8-9 products of exclusive products and has lined up two 9(3) product launches for FY15, one to be launched in Khariff season and other in 2HFY15. Management is confident of achieving 20-25% growth for FY15 also.

- PI Industries has strong balance sheet with less than 0.12x Debt: Equity ratio. Backed by strong cash generation, the company plans to invest Rs 150 cr each for next two years, to enhance the capacities at its Jambusar plant.

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. We are introducing FY16E numbers and rolling forward our multiple to FY16. We recommend to HOLD the stock for the price target of Rs 347 (16x on FY16E EPS)