First to answer on PI -
I too had that doubt before I initiated my position here, however my line of thinking is below -
- Agri input has 3 main components
Seeds: From where the plants grow. This is the fundamental input for agriculture sector. Farmer depends on seed prices, seed quality for his acreage. The more he seeds the more acreage. So, government cannot have the prices of seeds grow as per the whims and fancies of seed producers. Agriculture still occupies major share of our GDP. So, government will interfere from time to time. Their own political success largely depends on how well farmers do!
Fertilisers: These are the chemicals that plans need to grow faster. The basic nutrients that nature provides for plants are oxygen, hydrogen etc but if provided with further nutrients like phosphorous, nitrogen plans will grow better. Here too I believe government intervention is there.
So, Seeds + Fertilisers make the basic requirements for agriculture. Fundamental requirements.
Pesticides/Herbicides etc.: This, in my opinion, is value added product. Farmers use it or not is entirely on their discretion. Pesticides as the name suggests are used to KILL pests. This is like downside protection which is discretionary in nature but very important. Since this is not a fundamental aspect of agriculture (though very critical), government would not like to interfere in its pricing. As such the pesticide usage is very low and we lose anywhere around 28-30% of the crops to weeds, pests, rodents, fungus etc. so any farmer education in terms of its usage will protect their downside.
My basic argument is, seeds and fertiliser are the basic ingredients without which no agriculture production itself can happen while pesticides are for downside protection and productivity improvement. An example, Any company goes for productivity improvement is left for its discretion but for its business to grow it needs to recruit employees. Here employees are seeds while productivity improvement tools are pesticides. Government can freely interfere in basic things of a business not on a value added product used to protect downside of a business.
Not sure if my examples makes sense or not or whether I have been able to explain what’s in my mind.
Another side to PI is, seed penetration is 100%, in a sense, I mean every agri land which has some plant grown on it has a seed, right? But that very agri land which has a seed in it does not have pesticide yet. In fact, we are at the bottom of the ladder in pesticide usage and for us to achieve food security, plant protection and better quality seeds are inevitable.
Yet another investment angle is, agri inputs only form 40% of the PI revenues while CSM form 60% where the high margins are there along with good order book! Sorry, I have explained in far more lengthy manner and bore you.
Page: yes, the valuations are on higher side, but Page would have earned them. But I’m not sure how long will they sustain if there is any slippage in revenue growth. Mostly might see time correction after the initial sell off (IF at all). Speedo, I’m happy to know that the prices are on higher side. It brings the aspirational value to it. If economy were to grow at 8+ for 3 years straight, you will find many middle class families affording these prices. Anyway, it forms a very small part of revenues as of now. Having been bullish on Page in different threads, I have added MPS and Cupid at the cost of Page and Gruh (though little tweaks only).