For quick reference
PI industries was the second highest recruiter by hiring 5 students.
Highlights of Q3 FY18 and Nine Month FY18
- Company is focused on upgrading technology to get higher productivity. Active value chain and global partners support is very strong.
- In domestic market company has suffered because of delay in monsoons which in turn reduced the investment by the farmer in farm segment.
- Recent announcement in Budget like MSP, Gramin agriculture, increase in budgetary support in Farm credits, Fasal Bima Yojana and higher allocation of krishi sichay yojana these initiatives will help for a sustainable growth in agriculture.
- In domestic there were availability issue in Tamil Nadu, Karnataka, Chhattisgarh has impacted company performance in Q3.
- Company’s new products have a good yield and well accepted by the farmers. Full potential of these products are expected to occur in coming year. Export is also ramping up. Improvement in global market gave sentiment that growth momentum will be good.
- In recent past, there was stress raw material supply from China impacted supply schedule of company exports. In short term, company will find an alternative solution for this raw material.
- Company expect consistent growth because of healthy orders in pipeline.
- Financial Performance
o Q3 Performance
Revenue grew by 10.3% to 538 Cr this was driven by 3 % rise in domestic sales and 14 % in export
EBITDA came at 105 Cr with a margin of 19.5%. Product mix has impacted raw-material prices have result in shorter margin for the company.
PAT stood at 81 Cr
o 9 month FY18 performance
Revenue stood at 1683 Cr marginally lower YOY basis due to uneven rainfall in kharif , GST impact and lower export during FY18.
EBITDA stood at 358 Cr at margin of 21.6 %.
PAT came to 106 Cr. It is lower mainly due to effective tax rate from 14 % of last year to 22 % this year.
Net Debt-Equity stand at 0.03 and company be cash positive with available cash flow of 243 Cr as on 31 Dec 2017.
- Does the fall in EBITDA margin by 200 basis point is one time or it will be for longer time and how raw material supply impact further?
o There were multiple reasons for lower EBITDA margins most important reason was product mix given the agro climatic change in this quarter. Some impact was because of price increase in raw material. Demand softness was also there so these price increase, could not been passed on.
o In next quarter, this product mix cycle will not be there but pricing issue from china is concerned because there Chinese year is over by the end of Feb so things will again be normalised.
o On supply side there is a problem from China so all companies are trying to find the alternative raw material solution. Dependency of raw material which was 30-35 % has already come down to less than 20 %. In next 6-9 month it will further go down substantially.
- What about demand side when company think that growth will come back to normal?
o Global scenario is certainly improving and today situation is much better compared to last year. The inventory level has gone down and this is clearly reflecting in many of these projects the demand is also coming back.
o Production Campaign is again starting, depression has come down. Company has done 14 % but yes company can do easily 20 % because business was there in hand. There were two Challenges
One is raw material supply from china.
o Whatever Company was expecting in Q4 will happen in Q1 FY19 . Situation is only improving in term of demand. Current order book is around 1.15 billion.
o Overall the Rabi season is expected good than last year.
- Did company commercialised any new product in export market?
o Company has commercialised two new products and two products will be commercialised in Q4
- What kind of growth company is expecting in export in FY19?
o It depends on raw material but company expecting growth is reasonably good.
- Which segment saw incremental drop in lower EBITDA margin?
o It was mainly because of domestic area because product mix was not so good as expected as plan.
- Will export growth come from internal molecules or new molecules?
o It will be from both because of slowdown of demand now market will revive and secondly new molecules are getting lots of enquiry and that enquiry are converted into business.
- What CAPEX company has done this year?
o It is 150-200 Cr in current year and it will be almost similar in next financial year.
- Lot of conversion is coming to India from china so what is the opportunity for that?
o It will be a great opportunity as if any conversion or attraction come to India Company is ready for it because company have experience of more than 20 years. This issue in china is reflecting very good growth in Indian chemical industry. So company will become preferred partner for the molecule.
- What would be company’s view on farm economy right now?
o Even if 50 % of what company is getting and budget speeches happen on ground then it will be a great opportunity for the farmers and the whole value chain. On side MSP will increase and on other side it will improve lot of efforts of productivity for the farmer. MSP will happen immediately in some crops.
- Company dependency on china is 20 % so does it will impact company for further few quarters?
o This cannot be seen from this point of view. Say for example to make product A, A raw material was coming from China but now there is issue there so whole A product get stuck. That is what company is trying to solve from last 6-8 month. In one-two quarter that little dependency will also get over.
- Kindly give breakup of revenue from domestic and export market for 9 month and this quarter?
o In Q3 Domestic revenue was 170 Cr and Export revenue was 360 Cr.
o For Nine Month Domestic revenue was 680 Cr and Export revenue was 970 Cr.
- Company is focused on Backward integration with CAPEX of 150-175 Cr next year so what opportunity company see to invest in and being an asset light business model will these types of CAPEX bring return ratio down?
o It depend on economic whether company is doing backward integration in-house or find a source in India to de-risking the leverage. If backward integration gives benefit to company financially then company will do it for sure. Company has already done backward integration in two product which give advantage financially and also to target new products. Once capacity set up then Indian intermediary will be company customer who was importing from other countries. Downstream product also comes from these intermediaries.
- In a press release company has told that growth and demand will pick up back in next year FY19 so it will be First Half or second half of FY19?
o Again there are two face of it
First is global scenario that will change from First half of FY19 or calendar year.
Second is company have orders and business is there from current point only
- What about domestic growth in volume in progressive state like Gujarat , Punjab, Madhya Pradesh where agrochemical is already in use ?
o If agrochemical condition remains healthy then yes company will perform very good in all these states. Because company is present in PAN India basis. Company has launch 5-6 product this year and there is big pipeline for the introduction of new products in next financial year and coming year.
- In last quarter company was talking about 10 % growth in export market so is this look achievable or company want to revise it ?
o It looks difficult to achieve it company have business on hand and everything but achieving 10 % is really difficult today. Further clarification will be from next quarter.
- How many products company is going to launch in next year?
o Most probably 2-3 products will be there out of which One will be for Kharif and one for Rabi.
- In CSM business how much company have commercialised till date and what about pipeline?
o In these three quarters, company already commercialised two products. Two more products will be commercialised in next quarter. Going forward there will be significant pipeline in R&D and more than 30 odd projects and 4-5 must be in advance stage and will get commercialised in next year.
- Name products name which recently launch and doing well?
o Wisma , Header ,Cover these product have done very well .
- What efforts company is taking on Pharma and specialty chemical side?
o Yes company is taking many efforts in pharma and demand is there from last one year. Secondly there is dramatic change in outlook and valuation so it is little better. So company want to grow bit more on that side.
- 15 % growth will be there in next financial year?
o Company can’t comment on how much it will be but yes business is there, water reservoirs is also good compare to last year, there are many products in launch and some had already been launched . So all these factor give company confidence that FY19 will be good.
- When the new product that company is going to launch will achieve their reasonable growth and contribute in revenue subsequently?
o For new product it take 3-4 year but yet there are some products that company had recently launched and they are contributing reasonable in revenue, they get a good size in 1-2 year only.
- What would be the tax rate in FY18 and FY19?
o Tax rate expect to be around 22% for FY18 and will be similar for FY19.
- In which segment company is going to launch new product. Kindly give in details?
o One of product will be in Wheat herbicides which is in the second season. One product also on rice segment and vegetable in insecticides.
- Two new products which company launch recently are on which segment?
o Three product launched on Fungicide this year in rice segment. On herbicides company launch product name Hover Company has launch a plant nutrient this year.
Bayer Investor Decks
Dow Dupont Investor Presentation
Few interesting slides ->
Few points ->
- There seems to be generic pricing pressure in Brazil and sales were down for full year for both Bayer & Dow Dupont. I am not sure they can bounce back & grow in this year. Rallis India Q3FY18 conf call also confirmed that there is Chinese competition in export market.
- Thanks to wonderful work done by VP community, it was established that PI Ind. has significant relationship with Bayer. With proposed sale of some crop protection businesses to BASF, I am not sure if there will be impact on CSM side. Relative to market cap of Bayer, businesses that will be sold seem not so large in size.
- Rallis India Q3FY18 conf call + PI Industries conf call mentioned about elevated RM prices in domestic market and imports from China. Although companies are trying to realign RM sourcing, margin might remain under pressure in the short term.
- Punting or delaying of Pharma initiative. Working on pharma initiative and executing on it is something I was really looking forward to.
Disc - I have sold my entire position over last few days. I am absolutely negatively biased due to my selling & these views shall be taken with a pinch of salt. This is not a sell/buy recommendation.
[quote=“rupeshtatiya, post:1095, topic:227”]
Thanks to wonderful work done by VP community, it was established that PI Ind. has significant relationship with Bayer. With proposed sale of some crop protection businesses to BASF, I am not sure if there will be impact on CSM side. Relative to market cap of Bayer, businesses that will be sold seem not so large in size
BASF will be acquiring seed business from Bayer hence no impact on the Agrochemical manufacturing contracts.
Most of the CSM contracts by nature have some raw material price volatility formula built in and at least in the CSM business which PI is doing for the innovative companies PI will be able to pass on this raw material price hike
This may not be relevant. I have been following PI industries for long and on the other hand, there is some interesting thing happening in the area where I live. (Pune)
People are getting more interested in chemical-free agricultural products and there are three extremely active groups in my area. They are zero budget natural farmers and customers. The activity is tremendous. Farmers in Pune district are being attracted to this farming style which emphasizes on no chemicals added to farms, using no modified seeds. Also, it is NOT organic farming. Even major farmers are turning towards this method and sooner it will be a major thing because of aggressive markets developing.
This farming style is created and promoted by Subhash Palekar. you can google and you-tube his videos and check that his camps are ever increasing.
I have been studying PI industries since last two weeks. Certain points have amazed me. I seek guidance of some expert on that.
1.Till annual report of FY.2015-16, company used to give bifurcation of Raw Material Imported and Procured Ingenuously, from FY.2016-17, that has been suddenly stopped. As far as I know that requirement comes from Sch.3 of Companies act,2013, and not from AS or IndAs, so switching to IndAs should not have bearing on that. The same is the case with Rallis but other Agrochem Cos. have reported the same bifurcation. Can somene tell me under what head now I can find the same bifurcation? Or have that bifurcation been removed altogether.
2. In sale of finished goods section previously company used to report under three broad heads, namely, “1.Speciality Chemical, 2.Agro Chemical and 3.Plant Growth Nutrients”, but from FY2016-17, they have switched them to “1.Active Ingredients and 2.Formulations”. Can someone help me regarding that?
3 I had been going through research report from motilal oswal on PI Ind. In that they have calculated the EBITDA margin for CSM business and Agrochem business, separately and according to them there was vast difference around 400 BPs in the EBITDA margin of both of the businesses. On the contrary, while going through one of the transcripts of recent concall by company where one of the analyst had asked question on the difference of margin of the two businesses and he was replied that company doesnt really treat both of the businesses separately, and more so margin of both of them is roughly equal. Now I am under great dilemma with regard to that. Who is right here, Does company want to keep that secret or its just Motilal People are bluffing to show their analysis more superior and fancy?
Weak Fy18 for PI…
Some signs of improvement seen in H2Fy18…
Commenting on the performance, Mr. Mayank Singhal - Managing Director & CEO, PI Industries Limited, said:
"FY18 has been a challenging year, where the muted growth delivered did not reflect the underlying potential of our business, brands and orders at hand. However, second-half onwards we have seen initial momentum in growth both in the domestic and export markets. The 5 new products that were launched in the domestic market during the year have all been well accepted by the farmers. We continue to invest towards a vibrant product portfolio covering a broader crop profile. There is visible traction in the solutions centric approach we are taking to business, where we are engaging closely with the farmer community through digital initiatives. Similarly, with the aid of modern real-time technology, we are expanding our connects with the retailers and trade channels as well.
Under exports, we saw commercialization of 4 new molecules in the year. Over mid-to-longer term, we can derive comfort from the significant increase in both the enquiries and scale-up pipeline. Further, we are specifically targeting the development of new building blocks in adjacent and novel chemistries with a view to increasing the scope of export opportunity that we can gainfully target.
In line with our objective of both broadening and deepening our presence in domestic and exports market, we will continue to expand our footprints by leveraging our strengths and capabilities. Looking
ahead, the various initiatives undertaken by the Government together with the pick up of demand in global markets are indicating a better performance trajectory in the upcoming years.
A focused approach to drive an innovator-centric portfolio will be the key enabler for growth. We expect domestic revenues to grow on the strength of expected normal monsoon, various Government initiatives and realization of the potential of new and recently introduced products. The domestic market will witness 4-5 new launches in the coming year. In exports, we are expecting volume scale-up in the existing molecules, whereas we intend to commercialize 4-5 new molecules. The plan is also to develop and commercialize new chemistries as part of building new blocks in novel technologies. Whereas our efforts towards pursuing R&D continue to build solutions and expand our offering to the global innovators, our continued investments in capacity expansion in exports are expected to bring fruits in the mid-to-longer term.
Q4Fy18 Results: https://www.bseindia.com/xml-data/corpfiling/AttachLive/bd7d6c84-7f77-48dd-871a-426cfd7b5db7.pdf
Media Release: https://www.bseindia.com/xml-data/corpfiling/AttachLive/7599d930-ed4f-4373-8cac-96b152acc1f2.pdf
This means management guidance of a single digit growth in sales for the year not achieved.
I remember in last concall they had still guided for a single digit growth for the whole year…which was to imply a 25-30% growth in Q4…and sales growth was just 3% in Q4…
So its a guidance miss clearly…
P I Industries Ltd
- Company had introduced 5 new molecules in Domestic market and 4 new molecules in export market
- Company had doubled its R&D cost in compare to last year
- Company had scale up its product capacity
- Q4 FY18
o Revenue grew by 4.2 % to 625 Cr compare to last year same quarter
o Revenue growth driven by 10.4 % increase in domestic business and 0.4 % increase in export business
o EBITDA stands at 135 Cr with product mix and high cost of raw material
o EBITDA margin stood at 21.5 %
o PAT stands at 105 Cr , due to higher effective tax rate
o Revenue stands at 2277 Cr flat compare to last year
o Revenue from domestic business was 822 Cr lower 1.9 % compare to last year
o Revenue from Export business was 1455 Cr higher ny 1.2 % compare to last year
o First half of the year was affected due to soften demand
o EBITIDA stands at 492 Cr
o EBITDA margin stands at 21.6 %
o PAT for the year stands at 367 Cr
o Tax rate for the year was 22.9 %
o Total debt for the year stands at 83 Cr with Debt/Equity ratio of 0.02
o Cash balance for the year stands at 283 Cr
- Why was the shipment get delayed ?
o Due to logistics issue from the company side
- Does demand is in increasing trend ?
o Yes in global market demand is increasing trend and it will reflect in order . Company see FY19 as a good recovery year for the company
- What was the matter of raw material shortage from China ?
o It was a One-off kind of thing
- If demand improve and raw material supply goes on softening then does margin expansion can be expected ?
o Yes it will if all goes normal
- What kind of geographical mix of business ?
o 40-42 % comes from domestic revenue and rest comes from export which inclue Japan, Europe , U.S.
- What was the quantum of inventory that got delayed in shipment ?
o Worth 70 Cr
- What kind of growth company expecting going forward ?
o 18 % growth in both domestic and export market in FY19 and going forward
- What about order book going forward ?
o It will remain same , incremental order will be generated
- What are the total number of molecule that are commercially active ?
o 24-25 molecules are active and also a very large pipeline is there in R&D . All molecules have different scale which were launch earlier and in current year
- What percentage of revenue comes from top 5 molecules ?
o About 70 % of revenue comes from top 5 molecules
- If the guidance of 18 % of growth is on constant currency ?
o It is volume based because there is lot of volatility in currency prices
- From where main drop in EBITDA came from ?
o Revenue has been flat but investment in R&D increase for long term as lot of new molecules has been introduced so promotion is in place . Investing is going on in people , expansion program and it will continue to mid to long term
- Can growth be above of 18 % ?
o It depend on capacity and company is investing a lot on it in current year in terms of debottlenecking and opening new plant . Company see robust growth in coming future
- Is the launch of new molecules are first time in the industry or regular molecules ?
o It is mix of both
- What CAPEX company had done in FY18 and planning to do in FY19 ?
o Company had done CAPEX of 170 Cr in FY18 and planning for 225-250 Cr in next year . CAPEX is majorly for export business
How does rupee depreciation impact ?
o It is positive for export business but same time the company become more competitive to others .
o In domestic it impact negative to increase price of import of raw material.
- From launch of new molecules does any on them will be big ?
o Yes very much . It will be used in couple of herbicides and fungicides.
- What are the component of other income ?
o Interest Income , Earned income on Cash.
- Is there any plan of opening new plant in FY19 ?
o Yes company is planning for opening two new plants in FY19 which will be multi product . Both will be commission by end of December-January FY19 .
- Is current gross margin will be sustainable ?
- What will be the total number of molecules after commissioning the newer one ?
o Total will be 30-35 which will be proprietor patent . This is year there was 70 products in R&D . Majority of them will be on agrochemical side , One in pharma other in electrical chemical.
- Will the growth will differ in first half and second half of FY19 ?
o Yes it will because in second half company will have 2 more plants commissioned so capacity will increase and order book also.
- Current investment of new plant will be in existing plot or any other areas ?
o Yes currently new plant will be commissioned in same plot. Further in FY20 the expansion will be done in another plots.
- What about supply of raw material issue going forward ?
o Company had solved it by developing 6-7 alternative vendors India . Company is focused on time bound method on developing Indian manufacturers and suppliers for all these critical raw material company is importing from China.
o Company is also diversifying geography in China to get sourced from alternatives
- When will company again grow like it was till 2016-17 going forward ?
o There are some external factors that are affecting the company growth but in FY19-20 these all issues will get solved and company will get back on track
- What was the R&D expense in FY18 ?
o About 60-65 Cr and it is doubled in current year compare to last year
- What is the tax rate going forward ?
o In FY 18-19 it will be 19-20 % and it will be stable going forward
- Can it be assume that the new molecules on CSM side will not be in large volume ?
o Yes these will not be in significant volume, because their demand will take place in next 2-3 years. It is not necessary that all the new or existing molecules must be there in order book . They are in order book at initial stage to build capacity and demand not in Mature stage
- Does company will not get affected for 3-4 quarters if any issue come China side?
o Yes company will be comfortable , because company is developing alternatives and that is part of company plan . Company is expecting a smooth supply season
- What percentage of raw material source from China ?
o Currently it will be 16-17 % of total raw material . In last couple of years this percentage has been significantly reduce it was more then 30-35 % previously. So company is not dependent on China
- What percentage of products on which company is vertically integrated and what percentage does company buy from outside like technical ?
o Company business model is based on partnership where company bring products from innovators and then do unique formulations and then distributing it under branding . So company is more on value creator partnership side rather then vertically integrated
- How would the regulatory change of import of molecule will affect the company ?
o It is not on manufacturing raw materials
- Is the growth in CSM business is coming from existing molecules or new molecules ?
o It is coming from both existing as well as new molecule that company is commercialising
- From company guidance of growth of 18-19 % what percentage will come from newer molecule ?
o 8-9 % , Two things to consider
Molecules launch last year they are well accepted and they will also grow
Newer Molecules will also grow supported by better monsoon
- What would be the export in ratio in first half and second half , would it be 45:55 ?
o It would be around 40 : 60
- What were the revenue contribution from domestic and export business in Q4 FY 18 ?
o It was 187 Cr from domestic business and 130 Cr from export business
- What qualitative change does company see in last few years ?
o Ye lot of changes are happening
Customer Base is increasing
Getting more inquiries from existing customers and also from new customers
Most of the opportunity which was handle by innovators are also now coming to company
Lot of new technologies are also being developed . Company has developed two technologies which are for the first time in the world and very successful commercialised in terms of capabilities
Issues which are getting in China led Innovators to source products from alternatives so those queries are also coming to companies
- Is the scale of contracts are getting big as going forward ?
o Yes there are certain place where the contracts are sizeable and there are some molecules where going forward the contracts will become sizeable
- Company had plan of manufacturing sodium , how is that plan going on ?
o That is progressing well company had already applied for registration that will be done soon in a quarter
- What are the duration of a molecules ?
o It depend on their demand . One molecule can exist for 100 years also . Normally it range from 20-30 years
- Does the CAPEX cost include registration of molecules ?
o No it is a pure infrastructure CAPEX. Registration cost is also not significant
- How is the current price trend on raw material front and how company see it in future to passed on ?
o It is uptrend prices are increasing although they are expected to be normalise . This situation had been faced by company every year . To settle it in domestic market a lot will depend on scenario of geopolitical , monsoon , and how season pans out and the competing scenario also exist .