@reacher, I would still respect @hitesh2710 views as it’s better to be a bit conservative on the estimates and work as if the EPS is around 22-23. Once FY16 completes, of course, the more EPS the better and market will re-rate then if the EPS is above the estimates.
I think the corporate tax rate is applicable from FY 17 onwards (April 2016?) though not sure on it.
I won’t factor in FY 17 yet personally, will do only in April 2016, that’s my personal view, though with secular growth companies market tend to price in much of the future ahead itself.
indian farmers likes brand because of they give predictable yields
kefun, oshean brands have done really well
selective launching 1-2 every year
challenges in monsoon, muted growth possible in second half
biovita relaunched
in-licensed products have gone to 70% - I think this is giving much better margins
CSM
CSM growth flat in q2, customers take the deliveries in 2H
plant 2 at Jambusar started in sept, plant 3 by end of year q3 in dec
order book of 610m
A molecule takes around 2 years to ramp up from early stage to commercial production
PI does not have much impact of crash in global agri prices due to it is mainly into molecules in early stage of the cycle, only matured products will see impact
infact they are getting more and more enquiries from global companies for out sourcing - in 1H they saw 20% more enquiries in CSM
the impact of global agri commodity crash is that farmers will look to shift crops which have better prics and try to reduce costs which will impact mature agri input products. PI is in early stage products will not be impacted much.
started working on pharma and speciality chemicals - this is pilot stage - target 10-15% sales from these segments in next 3-5 years
Strength of the company includes handling complex process chemisty/reactions and r&d and moving products from early lab synthesis to commercial production and key tie ups/trust with global agri MNCs that they will respect their IPs
FY16 outlook
blended growth (agri input + CSM) will be 15% growth with 100-150 point improvement in margins
300-350cr from two newly commissioned plants in jambusar in H2
fy16-17 slight tapering of tax rates due to jambusar being in SEZ ( My take is this will be offset will be higher depreciation of two new plants )
Highlights of the Concall by Capital Mkt
Net revenues rose 5% to Rs 446.1 crore for Q2FY’16 on a YoY basis while EBITDA increased 17% to Rs 84.8 crore and PAT jumped 19% to Rs 58.2 crore. For H1FY’16 net revenues were up 11% to Rs 1000.9 crore, EBITDA 22% to Rs 220.6 crore and PAT 21% to Rs 145.5 crore.During Q2 FY16, Revenues showed a growth of 5%. Domestic agri registered a growth of 10% and the Custom synthesis exports performance was flat during the quarter. Domestic agri-inputs saw healthy momentum in PI’s branded portfolio of products, which continue to give direction to growth. Custom synthesis exports have shown moderation in momentum during the quarter due to deferred off take schedule of customers, whereas full-year trajectory is expected to be maintained.
The company posted 10% yoy growth in its domestic agrochemical business at a time when the industry faces severe challenges due to deficit monsoon. Company attributes this performance to good traction seen in its key branded products such as Nominee Gold, Osheen, Keefun and Biovita. In the coming years, Osheen can become as big as Nominee Gold. As of now the company sees no threat to Nominee Gold from generic products. Company remains on track to launch 1-2 new specialty molecules in the next few years.H1 FY16 Revenues showed 11% improvement on account of 13% gains in domestic agri-inputs and 10% increase in custom synthesis exports.During Q2 FY16, the EBITDA stood at Rs. 84.8 crore with margins showing enhancement of 200 bps to 19.0%. A favourable line-up of branded products and moderating input prices supported margin growth in domestic agri-inputs. The growing share of custom synthesis exports continues to drive margin expansion. H1 FY16 EBITDA has shown gains of 22% at Rs. 220.6 crore. Margins stood better at 22.0% representing an increase of 190 bps.
Net cash from operating activities continued to be strong with a cash generation of Rs. 197 crore for the first half.
The company intends to steadily expand the leadership portfolio of products by introducing 1-2 new products each year; with an insecticide and growth regulator ready for launch this year
Like Q2FY15, this quarter also saw significant number of orders getting deferred to H2 resulting in flat revenue growth in CSM segment. Based on the local demand environment faced in their respective markets, clients have been deferring deliveryof their orders which has led to delay in revenue recognition for the company. However, the company has not seen any cancellation of orders.Management has indicated that in spite of tough global operating environment faced by global agrochem players, the company has seen 20% rise in enquires in H1FY16 itself.
Order book as of 30th September 2015 stood at $610 million. Company expects to commercialize two new molecules this year taking its total product count to 20.
PI Industries has commenced operations at its second facility at Jambusar SEZ in the last week of September 2015. This facility will be catering to custom synthesis export orders and has capacity of 1000 MT at peak production. The construction at third phase at Jambusar is currently underway and should start commercial production by end of Q3FY16. Capex incurred for these two units is Rs 250-300 crore.
The company aims to achieve high single digit growth in its domestic businesseven as industry is like to post flattish growth. The company is confident of posting 18-20% yoy growth in custom synthesis segment. Improved product mix and lower RM costs should led to 100-150 bps yoy margin expansion in FY16
Growth to rebound; margin expanding due to better mix
Revenue growth below estimate; to recover in 2HFY16, driven by CSM: PI reported overall revenue of INR4,461m (est. INR5,204m) in 2QFY16 as against INR4,266m in 2QFY15, a 4.6% YoY growth. Domestic agri-inputs registered a 10% growth while CSM exports growth was flat during the quarter. Despite a poor south-west monsoon, the company’s performance in the domestic-agri business was encouraging—driven by growth in branded portfolio of products. In the CSM business, the management informed that revenue has been deferred to 2HFY16 as the off-take was lower in 2QFY16.
EBITDA margin expands 200bp; adj. PAT below estimate: EBITDA margin expanded 200bp to 19% (est. 18.1%), led by better mix of products within the domestic agri and CSM exports business coupled with softening of raw material prices. EBITDA during the quarter stood at INR848m (est. INR942m) as against INR726m in 2QFY15, up 16.7% YoY. Adj. PAT grew from INR455m in 2QFY15 to INR550m (est. INR598m) in 2QFY16, a 21% YoY growth. Tax rate was lower at 27.7% due to higher capitalization; the management has guided for 30% rate for the full year.
Outlook remains strong: Jambusar Phase II is now operational and Phase III will be operational by December 2015 (income tax exempt for first 5 years); coupled with commercialization of 1-2 molecules every year, this shall drive the CSM revenue going ahead. The order book in CSM as on September 30 is USD610m and the company has received 20% more inquires than last year. The long-term outlook in domestic agri-business continues to remain strong with the launch of Vibrant and re-launch of Bio-Vita expected by year-end.
Valuation and view: With best-in-class capital efficiency (40% RoCE), insignificant debt-to-equity and robust growth outlook (21% revenue CAGR and 26% PAT CAGR), we believe PI is one of the best plays on India’s agri sector and CSM opportunities. We believe mix change in favor of the R&D-intensive CSM business would continue to drive rerating for the stock. PI trades at 31x FY16 EPS and 23x FY17 EPS. We maintain Buy rating with a target price of INR800, valuing the stock at 28x FY17E earnings.
The volumes in BSE is ABOVE 1 Crore and is almost 10% of equity changed hands. Only CARTICA has shareholding more than 5% apart from promoters. That is huge selling and of course some one entered as well, but that is quite an exit as total value is about 650 crore approx. Reasons could be any and we should not rumour until we get official news.
A quick look at the shareholding pattern of top 10 other than promoters suggest that it could be multiple FIIs selling as no single FII holds 1 crore shares. However, this shareholding is as per Sep 2015. But, I did not see any one entering with such volume in the past 3 months.
sir what will be reaction on monday , if one assumes any of the two scenario , suppose if cartica has sold which is very astute fund , andwhat if promoter has sold, business fundamentals has been rock solid as far as we know, still stock is languishing for 8 months
Are you sure Cartica has sold their stake. They bought the stake recently on June 15, 2015, “Cartica Capital picked up 5.29 million shares, representing 3.88% stake in PI Industries at an average price of Rs 605 per share on the BSE, according to bulk deal data available with the stock exchange”
There’s Mr Market for us.