Firstly Thanks for your kind words.
Now, to get back to your points, I think you need to look at the history of PI as also hear the entire concall to understand some things which are complex. I will be more than happy to provide you the entire playback of 74 minutes long concall which was held recently. Its in mp3 form and if u want that do mail me I will immediately provide it to you. Also, I have with me past 10 ARs of PI which give a great insight into the road traversed by the company in last many years in both agri-input and csm space. I will provide you that also as research is a very tough process and we need to dig deeper and deeper into a company to arrive at fair and true potential of the company.
Now, to reply to your points, i will try to do it as briefly andsimplistically as possible so that things get crystal clear.
To your first point that "growth in CSM revenues of PI was so sudden that it looks like outsourcing possibilities suddenly dawned upon the global cos" ,
No- it is not sudden. Its the result of last 10 years efforts put-in by the company and the relationship built in and credibility established. Yes.. PI is into csm business since 2000 and I don't know you are aware or not but the business model which PI has adopted of focussing on patented products, it takes a great amount of time to estblish trust and prove your R&D capability. Once these things are done scale-up is very fast as in India there is no company following such model of focus on patented products (most are focussing on off-patent molecules) and that too in their early lifecycle. Such molecules are very critical to the innovator companies and so they pick their suppliers very carefully. This is the reason why in early part there are just one or maximum two suppliers selected after rigorous evaluation as any delay in delivery or flaw can result in significant loss of revenues to innovator companies. Hence, it was the efforts of PI since last many years that has resulted in swell in order book and it was not atall sudden.
Now, to your second point as to "How many global cos have a tieup, who are the major ones? How long is the relationship with these cos (is it a new & untested relationship built only in the last one year?"
I will say here that many of such relationships are kept confidential except the ones that we can know of when the company inlicenses their molecules for Indian market (as in case of Nominee). Hence, co. has not provided no. of companies with which it currently has tie-up and their names. However, the relationship in this business are not atall untested and short since these are critical relationships which affects both parties equally- also, the current order book is the result of last many years relationship which PI has built with global agrichem companies and so the relationships oversighting the order-book are of many years.
Now, to your third point as to "Do not know about the manufacturing process much....is the "process research" aunique competency (will each molecule have totally different and complex process). Can other large chemical/pharma manufacturers see the profit in CSM bus and scaleup faster than PI? Who are the current competitors?"
Yes- the process research especially in early lifecycle of a patented molecule is a unique competency since in early stage the molecule delivery channel is highly volatile and therefore takes a time of 6 months to stabilise... once stabilisation is done only after that delivery can start. Other companies in India normally focus on off-patent products. Also, a few who focus on patented products like Divis has a slight different operating landscape and model than PI. To add further, focus on patented molecules is a time-consuming process and the scale-up here is much slower in the initail stage and so companies in India will not attempt to do so. As far as competition goes, there are no domestic competitors for PI and the current order-book is established by PI by winning orders against Saltigo, Lonza and DSM - all global majors in CSM space.
Now, rgdg. your last point "Is this potential already priced-in considering the 3 fold jump in the stock price ofPI?" ..
I will say a clear NO. Such innovative companies always quote at premium and PI is a concept stock and soshould quote at a significant premium. If you consider FY11e numbers, then PI's agri-input business should close in at 400 cr. and csm business at minimum 200 cr. Based on FY11e estimates PI is currently quoting at a p/e of just 11 and a mcap-to-sales of just 1.reasonable valuation of PI should be somewhere at either 15 p/e or a mcap-to-sales of 1.5-2 considering its underownership, clean management, backing by a strong PE and pending order-book giving visibility of future revenues and profts.Once the tie-up with Sony materialises in 3-4 years, PI should quote at a valuation of Divis somewhere at 25+ p/e. To just highlight a point, to inaugurate Sony-PI R&D facility Mr. Osamu Kumagai, Sony's vice-president was himself present which gives PI a great recognition.
Lastly, again I will say I will be more than happy to provide you playback of entire concall which is a must hear if you want to understand the company better.