>PI INDUSTRIES LTD

Results in-line with expectations
PI Industries reported Revenue of Rs 239.2 cr for the quarter, a growth of 15.8% YoY. Custom Synthesis Manufacturing (CSM) continued to outperform, with 55% YoY volume growth. Agri Inputs witnessed volume de-growth on account of adverse agro-climatic conditions and a high base effect. The volume de-growth was compensated by recently taken price hikes, leading to flattish growth for the Agri business.


Management has maintained its growth outlook of 30% for FY13 on the back of planned new product launches, higher off-take from existing products and scaling up of CSM business & commissioning of Jambusar plant. With monsoon deficit improving and sowing picking up, coupled with new product launched and existing products doing well, Q2 FY13 is expected to perform well.


Key Highlights
 Margins improved on account of improving product mix and higher operating leverage. EBITDA margins were 20.6% in the quarter as compared to 19.8% in Q1FY12 and 15.9% in Q4FY12. Management expects margins to improve by about 100 bps in FY13 over FY12.


 CSM continues to do well, with the CSM order book standing at ~$310 mn i.e. 4.4 times of FY12 CSM revenues, providing revenue visibility for the segment. Further scaling up of exports (CSM) business to happen via (a) higher volumes of newly commercialized products (b) additional facilities via Jambusar SEZ which is expected to be commissioned in Q2 FY13.


 Good traction is expected from planned introduction of new products. The company has launched one new in-licensed product towards the end of the quarter. It has planned three more product launches in FY13. Together these products would drive growth for the company’s domestic business.


 On account of weak monsoon, the company is cautious on pushing of inventory into the channel and is focused on working capital management.


Valuation & Recommendation
We believe that with factors like being a recognized player in the CSM segment, sustained order book with increasing margins and low per-capita pesticides consumption that provides opportunities for growth, PI Industries has a good future. At CMP, the stock trades at attractive valuations of 10.4x FY13E and 7.5x FY14E. Based on FY13E EPS of Rs 46.6, we have a target price of Rs 605, a potential upside of 26% from current levels. We continue to maintain our BUY rating on the stock.




RISH TRADER