|
( fig. In ` cr. ) |
Q3FY12 |
Q3FY11 |
|
Revenue |
||
|
Agri-Input CSM Polymer |
125-135 98-110 0 |
85.8 87 16.6 |
|
Total |
223 - 245 |
189.4 |
|
EBITDA |
43 - 48 |
29.86 |
|
Net Profit |
23 - 26 |
15.21 |
|
EPS ( in ` ) |
9.2 - 10.4 |
12.42 |
|
( fig. In ` cr. ) |
9'Month'FY12 |
9'Month'FY11 |
|
Revenue |
||
|
Agri-Input CSM Polymer |
420 - 430 252 - 264 0 |
305.1 150.6 51 |
|
Total |
672 - 694 |
506.7 |
|
EBITDA |
123 - 128 |
83.71 |
|
Net Profit |
68 - 75 |
43.73 |
|
EPS ( in ` ) |
27.1 - 29.9 |
35.69 |
Edelweiss Q3FY12 Estimate for PI Industries :
Revenue - 246.3 cr.
EBITDA - 43.1 cr.
PAT - 23.9 cr.
Comments :
Expect EBITDA margin expansion of 175bps YoY on
account of improved product mix and absence of the
low margin polymer business in the quarter.
Performance of newly launched products in Q2FY12
and the order book position of custom synthesis
business key monitorables
I think since q3 fy 11 was lacklustre, q3 fy 12 is likely to look even more better.
Mahesh, Has the Jambusar facility gone onstream in Dec 11?
No Hiteshā¦ Its going to be commissioned in Q1FY13ā¦
Rgds.
From the latest shareholding pattern disclosed, it seems that Sequoia and Deutsche are continuously increasing their stake in PI Indā¦ They have together bought further ~1.4 % stake in Dec.11 qrtr. by adding 3,45,449 shares in totalā¦ Sequoia seems to be more aggresive with it buying ~2.3 lakh shares in the qrtr. to increase its stake in the co. to 3.7 %ā¦
Together both the entities now have 7.45 % stake in PI Indā¦
Rowanhill has sold 1 lakh shares and an entity called Bengal Finance & Investment has picked up 1.42 % stake (3.55 lakh shares)ā¦
Rgds.
mahesh,
In a market that is moving up,somehow PI industries seems to be going down,i observed this when the last quarter results were going to come out,most of the market participants seem to know what the results are like,except the retail investors and the whole thing seems to be unfair,makes you think whether it is worthwhile to invest directly in equities when there is so much of information assymetry.Anyway i condider this as a long term investment and require your help on a good entry point with some numbers/future earning forecasts.
regards
biju john
Hi Biju,
Rgdg. your first point asto whether investing directly in equities is prudentā¦ It purely depends on oneās background, risk profile as well as whether investment into equities is his part-time business or full-time businessā¦ It also depends on what kind of time one can devote to equity analysisā¦ You see Biju, investment is not a business wherein you can just come anyday look at a co.'s nos., read some forums, have a glance at historical nos. and have overview of operational segmentsand if everything is found right plunge into itā¦ Its a full-blown permanent business like any other business and if one is not prepared for it MFs are the right wayā¦ However, if one is totally dedicated to it then the returns direct investment into equities can provide are tremendous and are no match to any business or MF returnsā¦This is because this is a space where you are not confined to a particular operational segment but you have varied choicesā¦ You can just study deeply and pick right segments which you think have great future prospects and invest into them and be part of their growth cycleā¦
Your point asto insiders playā¦ yes it happens in equities and retail players feel cheated because of that but there are two aspects to itā¦ one some plays are not strictly insider play but front running on expected things that will eventually turn outā¦ so players take positions on either side because of that which is evident from the stock price movement before the actual eventā¦second pure insider play wherein management is involvedā¦ wrt Pi i think its the first one that is happeningā¦
Now, with rgds. to your query on entry points and future fiscal nos. for PIā¦ in my report post Q2 numbers already I have given that nos. and I think the best thing will be to revisit the figures once Q3 numbers are outā¦Current ratecanalsobe considered asbest entry point as its just 1-1/2 months since Donald and his team talked to the management (and I must say he did an excellent job) as well as other firms met the management and I donāt think any significant negative thing has happened since thenā¦
Quarterly fluctuations are best to be avoided when co. is good and operational segment triggers are intact and at best such fluctuations offer good entry points in good cos.
Having said all these, I must state here that I have a significant interest in PI Ind. as it forms a significant part of my portfolio and my entry point is much lower so in the event of any adversities it will only reduce my profits but not put me to loss.
Feel free to get back to me in case of any query.
Rgds.
Hi Mahesh,
Thanks for the updates and the answers to all the queries.
One concern I feel regarding PI Inds is the location of its new plant. It was slated to go on stream in Dec 11. Is it operational yet or not?
The new plant is located in Sterling Sez and as seen from the stock price tumble and balance sheet woes of Sterling group of Nitin Sandesara, the group might be in trouble. So what happens to its SEZ is a matter of concern for shareholders of PI which needs to be cleared with the management.
Regarding Bijuās concern regarding stock price volatility many a times these kind of things are done by some active operators to wring out the weak hands from shares. In my experience many a times after these kind of sharp swings there is a sharp reversal in stock trend. (Not necessary that it may be the same thing.
Just to give u a fresh example,on Thursday, see the stock price of Arshiya Intl. The stock was getting very good support earlier at around 119-120 levels till then. On Thursday the stock price opened somewhere near 123 and then dipped to post a low of around 118 and then by around 11 o clock reversed sharply to cross 130 levels with huge vols. What happened probably was that a lot of stop losses got triggered near 119-120 levels and then stock price reversed.
Moral of the story is that one needs to have full conviction in the stock one holds (of course keep track of the developments) and then sit out these temporary hiccups.
thanks mahesh and hitesh for your inputs,although equity investment is not a full time occupation,i spend quite some time before investing,and maybe it is a passion ,especially the quantitative analysis.for a company like PI where one does not have a first hand view/experience of the products one has to rely on publically available info.the new plant coming up is around 80km from where i stay,maybe i will have to put that extra effort to find out the status/progress on the new plant,
sterling group has a port project in dahej and that is also progressing slowly,the new project not coming up on time could affect the future projections.Mahesh,maybe you could confirm on the status with this new info coming in.
Hiteshā¦
Rgdg. the plant commisioning, already I have covered it in some reply before, that it is going to be commissioned in Q1FY13ā¦The reason of the delay as put by the management during concall is tax-purpose as well as some last important works going on for the plantā¦
Rgdg. your concern rgdg. sterling group percolating down to functional units of cos. who took facilities there, I donāt think so as such hiccups seldom percolate down to actual ground-level as there are firm contracts in place since such facilities are critical for the actual functional units like PI as they take orders based on commisioning of such facilitiesā¦
Other two reasons why such concerns are totally unjustified are ā first, global innovators put the company,- they outsource their patented molecules work to,- to rigorous testing and evaluate each and every aspect including contracts they enter into for setting up facilities where their work will be manufactured as also progress of work on such plants as any delay in delivery will cost them more than it will to PIā¦
Second reason is the entry of Sequoia into Pi sinceSep. qrtr. which is further strengthened in Dec. qrtr. by purchase of additional sharesā¦ PE & VC firms like Sequoia do a lot of homework and are privy to a lot of confidential info which we are notā¦ They carry out a great amount of due diligence as also meet the management at every level, jun., mid and senior several times before taking a call on a coā¦ Since in Dec. qrtr. they have purchased additional shares there is remote likelyhood of any adversities on the forthcoming plant frontā¦
Bijuā¦
I have replied part of your query aboveā¦ rgdg. the future projections, as said before i will revisit it once q3 numbers are out and no figures of the new facility are included in my FY12 projection (post q2 numbers) so there will be no change in FY12 projection because of thatā¦
PI Ind. recovers today with disclosed buyers and absence of strong selling. Good buying seen especially in NSE.
Rgds.
Key Industry Takeaways from Rallis Analyst Meet :
(1) Monsoons, although overall above normal, but have been erratic as well as scanty in major agrochemical consuming states of the country.
(2) Such erratic monsoons have greatly affected the productivity as well as disturbed cropping patterns all over the country.
(3) Except for Rice and Wheat, acreages for all other crops have mostly been lower.
(4) Most of the crops except Soyabean, have experienced relatively lower pest attacks which has affected the growth of agrochemical industry in general.
(5) This year management expects overall agrochemical industry growth to settle in single digits vis-a-vis 13-15 % growth experienced last year.
(6) Rabi season has not started off well which is evident from sluggish growth in Q3FY12 and management expects Q4FY12 to be equally challenging.
(7) Margins are under tremendous pressure as working capital need has increased, farmersā buying power has decreased, input cost pressures have increased while inventory stock-up at distributor level has decreased.
(8) Farmers have become too choosy because of fall in their income and this year has been the worst year in past three years as far as farmersā income is concerned. Because of this, they are choosing low-cost generics over specialised products as well they are preferring value for money products.
(9) It has been too hard to push for newly launched products in the markets as distributors are refusing to stock-up inventory and are only buying products based on farmersā demand.
(10) Ensuing kharif season holds key and management expects positive sentiments to prevail by kharif season.
My Conclusion :
Alongwith having an overview of the industry from Rallisā management point-of-view, I also carried out a ground-check by taking feedback from some analysts who track the industry closely as well as have first-hand info on industry-channels. Rallisā managementās concerns are genuine to an extent and the agrochemical industry is undergoing a temporary lull phenomenon.
Now, our concern is, what all these means for PI Industries ?? The best thing will be to wait for Q3FY12 numbers and check management commentry after that but frankly speaking, I think it will be difficult for PI to touch upper end of our expected range (135 cr.) as far as agri-input revenues for Q3FY12 goes and at best it will be able to perform at lower end of our expected range (125 cr.) with sluggish margins. There should be no problem as far as CSM segment goes and the key monitorable there will be order-book position.
I tone down my expectation for FY12 rabi season agri-input revenue for PI to Rs. 260 cr. from the management-guided Rs. 280 cr. with EBITDA margin for the segment at 17.5-18 %. CSM segment revenue and EBITDA estimates should remain unchanged.
Next seasonās numbers will get clear once forecast for rains is available for next season but there is no doubt about the fact that Nominee Gold is going to continue its high-growth YoY next year too to become the largest herbicide brand of India as also Pi is likely to outperform its peers in terms of agri-input revenue growth in coming years too.
__
One disclosure from my side Ć¢ I have initiated reducing my exposure to PI Industries from now on and I will be reducing my exposure considerably in coming days. There is no fundamental reason for the same and its just based on my gut feel.
**
__**
__
This action of mine should not be perceived as my negative view on the stock as I still maintain my view that PI is the safest long-term bet in current markets for any fresher. However, I had taken a very concentrated position in PI last year and so am derisking it by booking profits.
Feel free to get back to me in case of any query.
**
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Rgds.
Board Meet announced on 12th Feb. 2012 (Yes its on Sunday!!!) for announcement of Q3FY12 numbersā¦ The announcement has coincided with good deal of buyingā¦Lets see how the numbers turn upā¦
Rgds.
The CSM results should be good this quarter with the rupee depreciatingā¦letās see how it goes.
PI Ind hhas been mine biggest capital destroyer of 2011 due to me entry at peak price.when can I hope to recoup my losses?
Hi Vivek,
Its a long-term story and canāt give returns in few months timeā¦ Let Q3 results pass by and keep close watch on each & every development with rgds. to the company. Its a good co. with sound management.
Rgds.
It is moved over 15% today!! Mahesh, do you know if there is any news flow on this or just pre-result rally?
Hi Abhishek,
No known newsā¦ Seems either the results are good, i mean much better than expected or some sort of corporate events must be coming like acquisitions which is long overdueā¦ However, I am reducing my position in the counter on every rise and running the risk of miss of an exceptional upmove for which Pi is well known.
Rgds.
PI had been put up on valuepickr when its market price was around 600 per share(pre split-effective price 300) and I had put up the same stock in TED when its market price was around 720 per share( pre split-effective price 360). cmp of around 500 is comfortably above both levels. At which level did you get in to be so uncomfortable?? Around 600 levels or so?
I think what you need to do is to look at the valuation while entering a stock. Page Inds is a fantastic business to invest in but for someone investing at 3000 odd levels risk reward becomes too much unfavorable.
Trick is always to catch a story when not too many people have caught on to it. Once the stampede begins it always becomes risky to chase a stock.
PI as Mahesh mentioned being a long term story, there is not too much chance of capital erosion but wait will be longer.