PI Industries - Superior Business Model

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Q4FY14 Concall Key Takeaways :

General :

One-off expense â Asset Impairment 5-5.5 cr. & Provision for Inventories & Receivables 5-5.5 cr.

Expected FY15 Tax Rate 28-29 %.

Expects 50-75 bps improvement in EBITDA margins in FY15.

Gross Debt is at 86 cr. – LT = 50 cr. & ST = 36 cr.

CAPEX for FY15 & FY16 is expected to be 150 cr. p.a.

Gross Block is at 524 cr. with CWIP at 30 cr.

CSM :

For Q4FY14 CSM contributed 235 cr. to revnues â a YoY growth of 4.4 %. For FY14, CSM contributed 925 cr. - a YoY growth of 55.4 %.

Jambusar contributed 120 cr. to FY14 revenues.

Jambusar expected to contribute 140-150 cr. to FY15 revenues.

CSM Order-book at USD 395 mn.

2nd phase of Jambusar will start contributing from FY16 onwards.

Expects 25 % YoY growth in CSM segment for each fiscal â FY15 & FY16.

Agri :

For Q4FY14 Agri contributed 127 cr. to revenues â a YoY growth of 20.9 %. For FY14, Agri contributed 670 cr. - a YoY growth of 21.1 %.

Inlicensed products contributed ~63-65 % to FY14 revenues.

Top 5 products contributed ~50 % to FY14 revenues. Osheen has entered top 5 club.

Expects to launch 3 inlicensed products in FY15 â two insecticides – 1 in Kharif and 1 in 2HFY15.

Expects 25 % YoY growth in Agri segment in FY15.

View Post Concall :

Q4 Margins were impacted by certain one-offs which is a good sign as it means for entire FY14, company has worked on good margins which we can expect to continue in FY15. CSM growth seems to have temporarily taperd off as both the plants are working at peak capacities and second phase is still one year away. This doesn’t take away the fact that with some balancing equipments and change in product-mix, company can easily achieve 25 % growth in FY15. Osheen has entered top 5 club thats a good sign and next two years will be key monitorable for this product.

Going ahead, we need to closely monitor next two quarters numbers to see any signs of tapering in both topline and margin growth front. Based on reported FY14 numbers and expected FY15 numbers (FY15e topline â 2000-2100 cr. ), upsides seem capped from CMP of 285. In normal market scenario, the stock should settle in the range of 218-250.

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Interesting viewpoints that should help the growth in revenues and profitability -

1). Atleast 2-3 new agri inputs for domestic market expected to be launched in this financial year…2 products in the next few months both in insecticides…(total 16 commercial products by March 14 end)…bsaed on R&D and efforts, every year expect to launch 4-5 new products

2). In-licensed revenues are ~65% of FY14 revenues…this years product launches also in-licensed…should drive margin improvement

3). CSM order book of USD 395 million…to be executed over the next 3 years…expanded significantly over the year

4). Working capital days have been reduced by 20 days, which should improve free cash flow situation going forward

5). Net profits to be improved when Jambusar plant gets operational over the next 2 years…tax rate to come down to 28-29% in FY15 and lower thereafter

6). Exchange rate risks not significant (@ Re >55) as part of the CSM contracts have currency gains/ losses as passthrough to the client; for the remaining Company has simple forward currency contracts (of course if the currency goes below 55, it may impact profitability)

7). Debt has come down from ~INR 180 crore to INR 85 crore; capex of INR 150 crore proposed for the following 2 years, which in my view should largely be met by internal accruals.

8). Climatic conditions (esp monsoon) may play some role in slower growth for the industry and company…though management confident of 25% growth in both CS and agri inputs segment…

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Q1 results are out.

Revenue up by 16%(471 Crore vs 406 Crore) y-o-y

Profits up by 48%(71 Crore vs 48 Crore) y-o-y

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Highlights of the Concall by Capital Mkt;
  • Revenues increased 16% to Rs 471.2 crore in Q1FY'15 compared to Q1FY'14 while EBITDA rose 37% to Rs 107.97 crore and PAT was up 48% to Rs 71.74 crore.
  • Net sales grew 16% as the compact portfolio of niche, high-potential products domestically worked in PI's favour though less than conducive agro-climatic conditions in parts of the country have moderated the performance expectations.
  • Growth in the domestic business stood at 26% YoY.
  • Custom synthesis exports have delivered on trend (7% growth YoY) on top of the larger upside achieved in the previous year. There continues to be sustained momentum from commercialized molecules which is translating into higher topline
  • EBITDA showed 37% improvement on a larger base (stood at Rs. 107.95 crore in Q1 FY15). Margins were stronger than trend at 23% (up 400 bps) due to better all round performance.
  • Pre-tax earnings growth at 38% mirrors the buoyant mood of topline growth. The working capital cycle has maintained direction despite the intervening adverse monsoon momentum.
  • Profit after Tax demonstrated a robust 48% increase over last year at Rs. 71.74 crore.Total debt stood at Rs. 54.89 crore as on June 30, 2014 from Rs. 86.01 crore on June 30, 2013.Commissioning of new capacities at Jambusar will serve to accelerate the volume and value growth in the business
  • The company expects growth of around 20% for FY'15.

Commenting on the performance Mr. Mayank Singhal, Managing Director & CEO, PI Industries Ltd., said;

"PI continues to march ahead with yet another solid operating performance characterized by good traction in the domestic operation and consistency of growth in the exports business. We believe that we have a business model that is focused on accelerated growth in revenues while recording improvement in margins.

The quality and distribution of rainfall this season will determine both the pace of the sowing activity and the quantum of acreages being brought under cultivation. In the existing circumstances our model has displayed flexibility of optimal inventory while letting us focus on the targeted product mix. There is a portfolio of products that we continue to benefit from in the domestic business. Whereas the benefit from the introductions made in the recent past is giving us good upsides we are equally excited about the portfolio of new products that are slated for launch.

We are pleased with how custom synthesis exports have scaled up. Utilisation levels across our plants at Panoli and Jambusar will continue to be strong given business visibility. As per our stated time table, we are on schedule to commercialise 2-3 molecules during the present year.

The build-up in the existing line-up is heartening and is a testament to our capabilities in meeting global requirements for the supplies of innovator products. While we have the benefit of a strong, rolling order book, capacity expansion work continues on expanding our SEZ facility at Jambusar. The new plants will lend further boost to our revenues and profit."

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Did anyone attend the AGM on 10th Sep? Would appreciate if you can put up your impressions of the proceedings here.

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I__heard the news of amalgamation of parteek finance and investments into pi . Parteek which is an investment company is an unrelated entity with PI . The reason given by the management is not clear. Is it not a corporate governance issue ? Is market concerned about the swap ratio? and that why is it going down?

disc: invested

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As per my understanding, Prateek is purely a holding company with no other business. The mgmt clarified this in one of the earlier earnings calls. This means there would be no changes to PI Industries balance sheet , revenue numbers or future revenue drivers.

The merger is merely to transfer promoter holdings held through the holding company into a direct stake , thus the shares held by the holding company Prateek Finance (73.8m shares) will be cancelled and transferred to direct holding of the promoter. This should not have any impact on the promoter holding %, operating business or related ratios for PI Industries. There is no dilution and no swap ratio issues as the shares are merely being transferred from the holding entity Prateek to direct promoter holdings.

Not sure why this was needed at this point in time but should be ok with investors as long as this is a housekeeping exercise with no impact on fundamentals.

Happy to hear from anyone with a different view.

Disclosure- tracking position.

Bobby

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As per my understanding, Prateek is purely a holding company with no other business. The mgmt clarified this in one of the earlier earnings calls. This means there would be no changes to PI Industries balance sheet , revenue numbers or future revenue drivers.

The merger is merely to transfer promoter holdings held through the holding company into a direct stake , thus the shares held by the holding company Prateek Finance (73.8m shares) will be cancelled and transferred to direct holding of the promoter. This should not have any impact on the promoter holding %, operating business or related ratios for PI Industries. There is no dilution and no swap ratio issues as the shares are merely being transferred from the holding entity Prateek to direct promoter holdings.

Not sure why this was needed at this point in time but should be ok with investors as long as this is a housekeeping exercise with no impact on fundamentals.

Happy to hear from anyone with a different view.

Disclosure- tracking position.

Bobby

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Q2 2015 results are out . Seems disappointing

Sales down 7.8% to 426 cr from 462 cr yoy

net profit down 11% to 49cr from 55 cr yoy

Sales down 9.5% to 426 cr from 471 c qoq

net profit down 32% to 49 cr from 72 cr qoq

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@Amitayu. Have been waiting to enter PI. Is it Good to get on board at 360-380? Might be the usual knee jerk reaction tomorrow?

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@Kalyan.

in July 14 Concall Management had already guided that Q2 results would be weak but volumes in exports (mainly from CSM buisness) would increase from Q3 and Q4 . due to recent sebi diktat can’t recommend buy /sell.

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Management has guided that going from here a very healthy order book is positioned in CSM buisness(will be delivered in H2) . So they are confident that H2 will be good and thus they will achieve annual revenue guidence.This is also another reason of the inventory days up bacause of capacity building up for CSM buisness utilisation in next quarters. In the agri business although PI have grown by 12 percent due to Poor monsoon.

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Mr. Mayank Singhal, MD & CEO of the co add the call.

Highlights by Capital Mkt;
  • Net revenues fell 7.8% to Rs 426.6 crore for Q2FY'15 on a YoY basis while EBITDA fell 21% to Rs 72.6 crore and PAT decreased 11% to Rs 49 crore.For H1FY'15 Net revenues rose 3.3% to Rs 897.8 crore on a YoY basis while EBITDA grew 5.6% to Rs 180.6 crore and PAT increased 16% to Rs 120.7 crore.Overall revenue growth in H1FY15 at 3.3% was mainly driven by 12% growth in domestic agri inputs and 4% de-growth of custom synthesis exports.
  • For Q2FY15, domestic agri input revenues were lower than plan due to difficult agro-climatic conditions and custom synthesis exports were lower as well.For Q2FY15 the margins were lower at 17.0% given steady revenues in the domestic business and lower exportsWhile the pretax earnings for Q2FY15 are lower than Q2FY14, the company expects growth momentum to resume in the coming quarters.The company expects Custom synthesis exports to see strong performance in the second-half with strong order book position.
  • Conditions appear favourable for Rabi as reservoir levels and moisture content in the soil are good given the delayed departure of the SW monsoonThe company expects overall growth of around 20% in the domestic business in FY'15.Current order book of custom synthesis export business stands at US $ 520 million.The company expects to roll out 1-2 new products every year in the domestic business.

Commenting on the performance Mr. Mayank Singhal,Managing Director & CEO, PI Industries Ltd., said;

"Performance during the firsthalf has followed subdued indicators of the Kharif season for the domestic business whereas momentum in custom synthesis exports was muted in line with our operating plan. Outlook for H2 is optimistic on the back of strong order book of custom synthesis exports and better Rabi season on the domestic front.

Acreages in some crops were affected due to erratic monsoons, which delayed the sowing activity across key agrarian states. The subsequent uptick in the rainfall activity has nearly restored the seasonal acreages besides priming the soil for a good Rabi with adequate moisture content. Our key brands continue to drive topline where launches made in the recent few years are showing noticeable uptick. We will be launching a new insecticide in 2nd half.

Growth outlook for custom synthesis exports is unfaltering given sound visibility from a strong order book. Higher momentum, as planned, will be delivered in the second half, given capacity de-bottlenecking and changes to the product-mix. The accretion to order book is robust and in line with PI's standing globally as a preferred supplier to innovators. Work at phase II of Jambusar is underway and the commissioning is slated for 2nd half of the next financial year. We also remain on course to commercialize 2-3 new molecules this year thereby meeting the requirements of our global innovator-partners.

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Sanyog Jain (PII esop trust) has sold 1,42,666 shares on 28th & 29th Nov 14 (off mkt deal)

http://www.bseindia.com/corporates/ann.aspx?scrip=523642&dur=A&expandable=0

Is that a matter of concern ??

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Company has plans to grow revenues to 1 Billion dollar in next 5 yrs

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Might be helpful

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1 Like
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Highlights of the Concall by Capital Mkt;

  • Net revenues rose 39% to Rs 505 crore for Q3FY’15 on a YoY basis while EBITDA increased 50% to Rs 94 crore and PAT jumped 79% to Rs 62 crore.For 9MFY’15 Net revenues rose 14% to Rs 1403 crore on a YoY basis while EBITDA grew 18% to Rs 275 crore and PAT increased 32% to Rs 183 crore.
  • Blended Revenue growth of 39% in Q3FY15 was the result of 30% improvement in domestic agri inputs and on 44% increment delivered by custom synthesis exports.Enhancement in domestic business was primarily driven by strong sales of new products launched in the last 2-3 years. This signifies sustained outperformance of sector given PI’s solid product portfolio. Exports showed improvement as global demand for some of the key products showed uptick during the year.
  • Q3FY15 EBITDA was at Rs. 94 crore giving margins of around 19%, delivering 140 bps increase YoY. This follows better product mix and also operating leverage from revenue growth.Q3FY15 Pretax earnings were at Rs. 91 crore given robust revenues and EBITDA growth. Pretax earnings for Q3FY15 reflect larger contribution from exports in H2, while domestic business earnings also demonstrated encouraging results.
  • The company expects overall revenue growth of around 20% in the domestic business in FY’15.Current order book of custom synthesis export business stands at US $ 520 million.The company expects to roll out 1-2 new products every year in the domestic business.The company’s visibility in exports remains strong where commercialized molecules are displaying continued traction. R&D pipeline and progress assuring commercialization of 2-3 new molecules every year, setting the base for sustained performance

Commenting on the performance Mr. Mayank Singhal, Managing Director & CEO, PI Industries Ltd., said;"Q3 reasserts PI’s quality of operations with growth coming in at 39%. The performance shown by us in the domestic agri-inputs comes on the back of our strong brand introductions over the last few years, and the ongoing farmer connect initiatives that we run. I am pleased that we have been able to deliver despite the unfavorable agro-climatic scenario. We have a very capable product portfolio, that is showing progressively better volumes YoY and it is our belief that the new broad spectrum insecticide launched by us during Q3 will trace a similar growth trajectory going forward.

Our world-class CSM business demonstrated good traction expectedly. We have benefited from strong increment in volumes that takes place as commercialized products begin scaling up. And I must add we have anticipated this change in pace, given the visibility inherent to the model. The future continues to excite us; with a prudent product mix and optimized capacities, our exports can deliver sustained improvement.

Construction of new plants for exports is progressing well and they are expected to commence production in the next fiscal year. Simultaneously new order build-up is giving us confidence of sustaining the current growth rate."

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Contingent Liabilities : 549.62 Crores.

How does this affect the financial position of the Company.