Please go through previous concalls of PI. This has been asked and adequately answered by the company.
Promoter purchasing the shares from the market.
http://www.moneycontrol.com/livefeed_pdf/Sep2013/PI_Industries_Ltd_100913_SAST1.pdf
That was internal matter;
http://www.bseindia.com/xml-data/corpfiling/AttachLive/PI_Industries_Ltd_100913_SAST2.pdf
PI industries Management Q&A was as usual business like. Company is on a solid footing, is confident about the future, and enjoying the fruits of the foundation-laying hard work of the earlier years.
There are some 5 company Q&As to update this time. So please allow me some time for recapturing these back.
I wish to highlight the main learning for me this time in PI. I was making much of CSM overtaking Agri-Inputs. While Management concurs that that is a good thing, strategically for the company there is no less focus on the Agri-Inputs business. They will always be looking to grow both segments strongly. Agri-inputs may be volatile but that is really the cash-cow business - very low capital intensity. The cash generated here is what is ploughed back to scale the CSM business which is capital intensive. That is how it has been, that is how it will be:)
Thanks a lot Donald. Was eagerly waiting for your post on the the Managment Q&A.
Regards,
Ankit
Good to hear initial take Donaldā¦seems very positiveā¦awaiting detailed interaction takeaways, will be crucial and interesting read.
Rgds.
I feel opportunity size for CSM may not be huge due to shrinking R & D budget while the same for agri inputs is still huge in India.
latest news about piind
PI Industries Management Q&A Sep 9, 2013,updated.
I am sorry it took so long this time (almost 3 weeks), but much of it was unavoidable and I just could not prioritise the update in time. We have sent this off to Management for their ratification and a couple of unanswered questions that I will strive to get back with, soon.
Meanwhile now that the Q&A is available, Senior ValuePickrs will be polled by Admin for a recco on the same - which has been pending for some time. The stock has run up a bit meanwhile, but we do have a process to follow!
I am sure in the long run, small run-ups wonāt matter, but following due-process will always weigh in significantly.
Cheers.
Hi Donald,
Thank you for sharing the management Q&A. As usual topnotch quality and really insightful.
When they increased the FII limit a few weeks back I was wondering if more QIP is on the cards for funding next phases of Jambusar. But debt is being reduced aggressively and if cashflows from Agri Inputs will fuel the CSM expansion then further equity funding may not be required. Will be nice to know what they have to say.
The Hikal story looks interesting and worth tracking.
FY14 is very interesting with both business segments in for a good year. Looks like a worthy candidate in the long term portfolio.
It would be great if we get some idea about the CSM and inlicensing space from the innovator companies - how strong is their ādependencyā on a company like PI for CSM and is their really a strong preference for PI in inlicensing?
Cheers
Vinod M S
Hi Guys,
Been getting some feedback that this PI Management Q&A is no great shakes - not much by way of insights; not much revealed, than what is already known:(
My take is pretty different. And hereās why?
1). PI is a pretty well discovered story. Regular Conference Calls ensure there is enough update on the company; so yes, there wouldnāt have been much by way of surprises. True
2). Answering in general - without getting into specifics - which coy has steadfastly maintained - cannot disclose for confidentiality reasons, and I for one, find that fair enough. It is NOT that they have ever shirked a direct question
3). BUT if you read between the lines carefully, enough has been said/revealed:) Also do read the earlier Management Q&A together with this one - to get the best out of the Q&A (ability to read between the lines).
Consider these few things:
a) Company Is in a healthy Cash Flow situation which is allowing consistent Debt Reduction. One of the biggest success patterns to notice - reducing debt as the company keeps growing!
b) CSM ramp-up is for real. The company is brimming with CONFIDENCE. They are speeding up on subsequent phases as expected with 6-9 months. Multi-year growth looks a given. Think about the GRIP on PATENTED moleculesā¦Is this company far far ahead of any potential new entrant? Can it continue to build on its strengths?
c) Agri Inputs - This year is a good year. Most of the upsides will be captured by Q2 though. But what about the future - the Food Security Bill answer shows the way - If the farmer is happy, we will be happy - over the next 3-5 year horizon! not a small statement, this. The 65:35 mix towards Innovatives vs Generics and the confidence of getting to 80:20 sooner than later is another pointer to better margin picture ahead.
d) The misplaced Asset Turn query (in last conf call) - another example of how most analysts get stuck at what is ignorable data/inferences. Asset Turns in this business will always be high. And as in any complex chemistry process - only keeps going higher over time - as process efficiencies kick in over multiple rounds of the same molecule.
e) Company having the ability to fish for acquisitions.
All of these point me to PI having a very secure run over next 2-3 years. They are growing strongly. Much improved Cashflows and BSā¦they can fund the growth needed. This year performance will give them additional muscle. There is no challenger in sight. They can only grow stronger in the next 2-3 years.
There is NO IF & BUT in this story. Is there? All they need to do is keep executing as they have been doing.
If the horizon is 2-3 years even at CMP (150) it is a good buy, according to me ā¦even though it has run up more than 20%ā¦since we brought attention to it one or two months back.
Disc: My views are biased. I hold significant positions and have added significantly @130 levels after 2 years of sitting in the story. and continue to add on declines.
Broadly I agree with donaldās assesment of PI storyā¦ Its a well discovered story.
There are not too many chances of the stock getting a big re rating in terms of PE expansionā¦ But the earnings will keep chugging along and as the story becomes better understood, there could be slight re ratingā¦ Overall looks attractive and worth adding on declines. I have been bullish on this one since the re look at it started after stellar q1 results.
Agree with Donaldā¦if the execution goes on as expected then PI is bound to prove a steady compounder in absence of any triggerā¦
However, I strongly believe that a management like PI canāt be idle and some form of move like acquisition or collaboration is likely to happen before turn of fiscalā¦that is when the next significant rerating of multiples will happenā¦and this has to happen today or tomorrowā¦although optically it seems major p/e expansion is not possible, but, stories like PI are few and therefore command significant premiumā¦till such premium is missing its an attractive IO for any long term investorā¦
If q2 numbers come as expected then I expect at least a 25 % upside from current levels till Decemberā2013ā¦
Rgds.
Discl. - I am invested into pi so my views have to be taken in that regard.
I agree that we will not see an immediate re-rating in this stock. But, as CSM percentage in the overall revenues grow and revenue & profit grows 25-30% CAGR, I donāt see why it cannot or should be trading at much higher (22-25 kind of) multiple. So, in the longer term, I am more inclined to think that this will be rated significantly higher, as and when earnings become more dependable (and that will happen with more rev from CSM as opposed to Agri, which is more climate dependent).
Thanks for all your comments. Please participate in PI discussion thread whole-heartedly, ensuring equal focus on positives & negatives, making for a balanced discussion!
One thing all seem agreed upon - that the business can keep growing at a 25% CAGR basis. There is enough visibility on that, and that Cash Flows will keep getting better as debt reduces further - very few businesses today are in this kind of a happy situation.
A request - letās keep off conjectures on re-ratingā¦Management canāt sit idleā¦kind of opinion pieces (not backed up by any data)ā¦that only serves in building up hope or hype. Letās stick to business and data and facts!
This thread is seeing meaningful participation from senior ValuePickrs after a long time, letās try and keep it that way.
Please be advised, the transcript of last Management Q&A with PI has been updated, based on the feedback/inputs received from Management.
Updated PI Industries Management Q&A Sep 07, 2013
Most are minor changes in tone/language for correct representation. A few changed data points/ inputs that are worth noting:
1). Hikal signing up agrochem innovators
No Comment
2). Addl sales contribution from co-branding Nominee Gold
15-20% (from 20-25% quoted earlier)
3). Agri Exports question
has been taken out
4.CSM capacity flexibility vs stagnant orderbook Query -But that should have meant a visible change in the order book too, right?
has been taken out
5). Is it right to say Pharma molecules have higher margins?
Yes.There are interesting opportunities being pursued. Higher EBIDTA margins but not necessarily high ROI because the investments are huge.
6). Timeline for commercialisation of next phases? Jambusar
May be 9a12 months
My interpretations from above
a) Hikal has made some inroads into this business. Will try to get qualified comments later during the year, as Hikal makes some progress
b) Do not factor in quick progress in Jambusar next phase (earlier 6-9 months)
c) Do not factor in Upsides from Pharma molecules. When they come - that will be a new investment - and will need be weighed wrt new Investment and ability to generate funds internally/debt raised
d) CSM orderbook vs flexibility - yet to be proven
Mahesh/Abhishek/Others - what are your views on above?
Hi Donald,
a) Hikal is a good co. to keep in the watch list but three things one needs to rememberā¦
-
hikalās focus has always been margins rather than nature of its products I.e. it is not like pi which from the beginning has focused on patented productsā¦
-
Hikalās main story apart from agchem is biopharma where it has initiated small but has big potentialā¦
-
Forex management is a real headache being an investor as co. has faltered two times before.
I have hikal as part of my portfolio but its a minuscule part unlike pi which forms a significant part mainly because of the difference in my confidence on management and overall conviction level.
b) Agreeā¦but any management will not like to let 10 year tax holiday pass away without extracting maximum out of itā¦and I believe co. is waiting for a significant tie-up before quickly sealing off further phasesā¦anyway even without that co. has shown good potential in ramping up old facilities much beyond expectations and similar can be expected from phase 1 tooā¦
c) thatās a tricky partā¦if management has some molecules from pharma segment in r& d stage then it must have shown its assets capable of producing it on commercial scaleā¦lets not go into detail on this as there are many things management will avoid talking openlyā¦but for the present we need to consider agchem opportunity only and thatās also compelling.
d) yesā¦
Donaldā¦did in your interaction talk of indofil sharing opportunity of osheen ariseā¦
Overall, lets wait for q2 results and keep our fingers crossed that what we are seeing --pi as a great story unfolding - actually comes trueā¦
Discl. - have kept 184 as my price for first review.
Rgds.
My understanding of PI story:
A molecule is nothing but the crop protection product (herbicide, fungicide, insecticideĆ¢)
Custom synthesis business:
PI does the process research and sells the final product to the innovator company. The revenue comes from the sale of the commercialized products. Not much revenue in process research.
For Agri input business, following streams of revenue
Generics: Not much Competitive advantage here.
In-licensed: not sure what this model is
Co-branding: PI markets and distributes the products for the MNCs.
Some questions:
Is the success of a molecule region dependentā¦How does PI determine the success probability of a product before actually signing the agreement?
What prevents the MNCs from entering a co-branding arrangement with another company also having equal/better distribution networks say kaveri/nuzivedu.
Note: I am not invested in PI, Still paying the tuition feeā¦
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