IGI Logo

Next growth phase to emanate from pharma…

About the stock: Incorporated in 1947, PI Industries focuses on complex chemistry solutions in agri and pharma sciences.

* The company maintains a strong research presence through its R&D facility in Udaipur, where it has a dedicated team of over 300 scientists

* The revenues of the company can be subdivided into custom synthesis manufacturing (CSM) and domestic formulation business with the former contributing ~73% to overall revenue in FY21 and the rest coming from the domestic formulations business

Q1FY22 Results: Numbers were below our estimates, impacted by subdued growth in the domestic formulation business.

* Reported revenue growth of 13% YoY to | 1193.8 crore, led by CSM segment (up 31% YoY)

* Gross margins improved 180 bps YoY to ~43.8% while EBITDA margin contracted 80 bps YoY to 20.8%, due to higher employee (up 20% YoY) and other operating cost (up 32% YoY)  EBITDA was up 9% YoY to | 248.9 crore

* PAT increased 29% YoY to | 187.2 crore owing to higher other income (up 238% YoY)

What should investors do?

The stock appreciated at 57% CAGR in last three years.

* We retain BUY on the back of better growth outlook of CSM business

Target Price and Valuation: We value PI Industries at 50x P/E FY23E EPS to arrive at a revised target price of | 3855/share (earlier | 3010/share).

Key triggers for future price performance:

* Strong order backlog in CSM bodes well for future growth

* Foray into pharma CDMO expands revenue visibility further and diversifies its revenue stream, to a certain extent

* Improvement in the operational performance owing to higher share of value added business portfolio to aid return ratios further

Alternate Stock Idea:

Apart from PI Industries, in our chemical coverage, we also like Neogen Chemical.

* Trigger for Neogen Chemical’s future revenue growth would be increasing CRAMS opportunity

* BUY with a target price of | 1085

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer