To create huge wealth Invest in companies that have a monopoly in a small market that is expanding rapidly.
PI Industries best exemplifies it as
It has a big grip on fast growing CSM business successfully taking the business away from the Japanese and Europeans competitorsas demand for faster cheaper CSM booms.
2)Huge opp size in CSM not only in field of agrochemicals but imaging.electronics and pharma which its catering to.Innovator cos happily focuses on discovery and marketing and outsources the rest to PI Ind.
3)Provides access to its MNC innovator partners to huge Indian market with its unique first of a kind product like Nominee Gold,Osheen,Keefun,Melsa.Huge opp size within India
4)This is on top of advantage of access to Indias talent pool and lower manufacturing cost giving MNC all the more reasons to tieup with a proven trusted reliable partner like PI Ind developed over last 15 years.This is a big moat for PI Ind
V ethical business group like TATA with superb execution skills and first gen entrepreneurial growth mindset.
AS they say PE is an optical illusion focus on size of pond and a competent fish which will keep on growing thanks to superb 37% ROCE.
Discl Invested since last 18 months and averaging on upside constantly.
I have read the entire thread of 624 posts (Give me candy ;-)).
PI, Mayur, Kaveri etc. - From these threads I have learned a lot and they have completely transformed my investing philosophy.
Now, at CMP of 660 PI industries seems to be trading at P/E of 40 (which is high?).
My question is can one enter into PI at these valuations from 2-3 year perspective?
OR even though business is great, valuation is too high. SO we say let’s not invest into this business unless there are major uplifting triggers?
It is not due to slow down , it is for higher base of this FY as per Mr. Singhal in the con call.Also as the IPR, CSM order book is growing significantly , they are enhancing capacity by building two additional facility which will start contributing in the revenue by the end q3 fy 16 . As per him in the con call, the margin expansion should not be expected more than 25-50 bps (100 /150 bps happened this year)
@orasparkle PI management has so far always achieved what it has guided for except in one occassion where it revised the guidance downwards. FY16 might be a year of consolidation since two phases of its Jambusar plant will go on stream. It might be post FY18 that we see Jambusar site contributing significant to revenues of the company and therefore the profitability. Management has said that its not only domestic but all over the world it is experiencing slight slowdown in Crop Protection business (which forms majority of company’s CSM business) and therefore coupled with higher base, has preferred to play safe with FY16 guidance of 18-19 % growth in CSM business. Key thing is valuation, since PI’s business model deserves it to remain richly valued on the bourses because of visibility involved, at 25xFY15 EV/EBITDA and 20xFY16e EV/EBITDA.
I think you are right mgmt guidance is v conservative but does not corroborate with the data on unexecuted order book and cycle time for such execution - so i think mgmt will beat their own estimates-I expect 35% PAT growth this year
if CSM business sees a slowdown, but as the market size is huge ,PI will have enough scope to grow at very good rate for next few years.Also penetration of corp protection item is very low in india 0.5kg/hectare (compares with 14kg/hectare in S. Korea and 7kg/hectare in USA), hence overall sales for corp protection will remain unaffected due to a year of bad monsoon.
guys look at Syngene ipo closing tomorrow.Its the first pureplay listing in CRO n business model is close to CSM business of PI Ind but opp size much large as its pharma.some marquee names like BMS ,Baxter n Abott as their clients.
Salil Singhal in an et now interiew after the q1fy16 results has said that we are working and committed towards a 20% growth in sales a 20% plus growth in np and a 50-60bps margin expansion in the yrs to come,my assurance to work towards this objective remains very firm and unshaken although i dont like the word commitment.
Highlights of the Concall by Capital MKT
Net revenues rose 18% to Rs 554.8 crore for Q1FY’16 on a YoY basis while EBITDA increased 26% to Rs 135.8 crore and PAT jumped 22% to Rs 87.3 crore.Growth during Q1FY’16 stood at 18%, with domestic agri-input registering 10%increase in revenues and custom synthesis exports delivering growth of 26%.Domestic Agri Input business of the company registered revenue growth of 10% yoy in Q1FY16 contributing around 50% of total revenuesreflected moderated market sentiment and cautious approach at the start of the season. Domestic industry in Q1FY16 has witnessed challenges due to initial fear of poor monsoon (on back of monsoon forecast of IMD) and poor profitability witnessed by farmers in previous year. However company could post positive growth of 10% amid weakness on back ofits strong branded product portfolio. Company’s key brands like – "Nomineegold’ – Herbicide for Paddy crop, “Osheen – Insecticide for Paddy & Cotton”, “Keefun” – Insecticide for vegetables and “Biovita” – Plant growth Regulator (PGR) along with many other brands has contributed torevenue growth.
Custom Synthesis exports maintained a healthy revenue run-rate. The business saw improvement YoY on the back of muted growth realized during Q1 last year.Custom synthesis exports showed good growth on the back of increased demand of some of the existing products. The company has maintained growth trend with commercialised molecules giving upsides as per plan. Going forward the company is looking at commercialising at least 2 newmolecules in the next two quarters. The addition of new phases at Jambusar will allow the company to extend its robust track-record of growth further.Management has mentioned current order order book of US$600 million for custom synthesis exports.Q1FY’16 EBITDA stood at Rs. 135.8 crore with margins at 24.5%. This represents an increment of 160 bps over last year. A favourable product mix and efficiencies across the operations resulted in margin enhancement.
In Q1FY16, company has launched one new broad spectrum insecticide under the brand name of “Vibrant”. This product – with active ingredient – Thiocyclam, is uniquely positioned to address twin problems of stemborer and leaffolder through single product. Company estimates that farmers are using product worth Rs 6 billion on protecting their crops from these pest attacks.
Debt-Equity ratio stood at 0.04.The company expects good growth in the domestic Agri Input owing to higher Kharif sowing that is expected to drive better acreages given the onset ofgood monsoon, Healthy reservoir levels compared to year ago which is good for upcoming Rabi season and periodic introductions of new products driving upsides along with products launched in the recent few years
Does Monsanto dropping its bid for Syngenta (which happens to be a client for PI Industries) have any positive impact on PI Industries? Not interested in the share price movement just trying to understand the business dynamics.
I don’t know if PI discloses client dealings. In general, absence of merger is actually a good thing for PI since both companies will pursue R&D efforts separately.
