PI Industries - A Unique Bet on Indian Agriculture & Patent Power

(Tejas Chachcha) #1090

IIM Ahmedabad PGP-FABM 2018 Final Placement Concludes; Godrej, PI Industries Top Recruiter

(neil_loamas) #1091

For quick reference

PI industries was the second highest recruiter by hiring 5 students.

(smehta) #1092

PI Industries
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.

(Skylight Investments) #1093

Can someone provide full Transcript of Q3 FY18 concall.