Hi Mahesh,
What’s the reason for choosing 184??
Hi Atul,
you have not grasped the PI story well and fully…I advice you to go through the entire thread and then make an understanding of its business as well as business model…Donald and his team has also done some great work in making the business understand to the layman, you can refer to their posts…
With rgds. to your queries :
Is the success of a molecule region dependent…How does PI determine the success probability of a product before actually signing the agreement?
In Indian agri space, distribution network, reach to farmers and understanding of their needs as well as crop and its pests incidence knowedge are the key…PI, with its existence over last many decades, has strenght in all these aspects and it is combined knowledge of these and many other aspects that determines success probability of a product…so far, PI has done well in this which is evident from its small basket of products turning out good sort of revenues…
What prevents the MNCs from entering a co-branding arrangement with another company also having equal/better distribution networks say kaveri/nuzivedu.
cos. you are talking are into seeds and PI is majorly into pesticides…There are just a handful of big organised Indian companies operating in this space and the opportunity is large enough to let grow each and every one of them.
Hi Jatin,
First, don’t misunderstand me as if I am telling that I will be exiting my holding of PI at 184…Its a review rate kept post Q1 nos. ( I had mentioned it before too ), where I need to reasses the entire story again at that particualr valuations…
Why such review rate is necessary particularly to me, that I will make you understand briefly…When I invest into any co. first I look at its story to build my conviction in it and then look at the valuation angle to assess the risk-reward at the time of my investment…Now after making an investment, once the rate appreciates, risk-reward changes…To me there are three particular rates -
first is Short Term Investors rate which is the rate that will look attractive to short term investors to make quick money with least possible risk…If we get a good compelling story at this rate we are lucky…
second is Medium Term Investors rate which is the rate that will look attractive to any medium term investor – this is the rate at which a stock will stabilise in absence of any trigger, and it is at this rate normally we get all slightly discovered compelling stories…
third is Long Term Investors rate which is the rate that will look attractive to any long term investor and from long term here I mean beyond 4-5 years which is best left to Institutional investors.
Now, from PI point of view, post Q1 nos., the rate at which it was available at was Short Term Investors Rate…184 is the Medium Term Investors rate which is arrived at after factroing in 800 cr. CSm revenue,680 cr. Agri revenue and 9.5 % PAt margins for FY14…As the time goes by, and if Q2 nos. come on expected lines, then 184-200 should be the trading stabilisation range for PI by December’2013…
It is not proper to consider here Long Term Investors Rate (LTIR) as they will find even 250 an attractive rate at present point of time…If such rate comes in the short term in absence of any trigger, it is the best selling rate (but, such things always happen in speculative counters and not in cos. like PI)
Since Ifollow a concentrated approach, and PI seems that it will stabilise between 184-200 in case second phase roadmap is not drawn as also no other trigger is announced and there is no surprise element in q2 nos., I need to reasses my holdings in PI at 184 (ofcourse post q2 nos.) to check whether I am going to need any funds till March’2014 which will be best taken out in this range…I plan to hold on to my entire majority holding till the rate doesn’t surpass LTIR or some major shock is not visible which can challenge my conviction in this stock (which is highly unlikely)…
This is my personal benchmarks and investment approach and it is best everyone designs and strategises his/her own investment approach depending on each one’s goals…
Rgds.
Atul,
Both your questions are answered in the Managemenbt Q&As with PI. Please read both teh Q&As carefully again to fully appreciate the points below.
1). success probability of a product
The entire region-dependent rainfall,cropping pattern, prevalent pests, common pesticide/insecticide/fungicide etc in use - are there in PIs MIS database collected from all over the country for donkeys years. This they use for GAP analysis - to identify a possible suitable molecule.
Then agreements are signed for exclusive marketing rights in India. Then local registration and development trials go on - after making the proper formulation and adjustment for India-region specific requirements. Agri universities are roped in for extensive trials as in Nominee. Shoukld everything be positive company launches the formulation.
I am surprised someone like you missed all that detailed process/methodoilogy info in Q&A.
2). Co-branding with others - what prevents
There is a quid pro quo involved in Co-Marketing. MNCs wont just offer PI co-branding on a platter. They want to ride piggyback on a bumper successful product…PI is happy to give that - reasons explained in Q&A - but in return - it wants to ride piggyback on MNC successful products and/or exploit the distribution reach of a RAllis or Dhanuka in certain regions - again as explained in the Q&A.
PI Q2FY14 my expectations are given below :
|
Q2FY14e |
Q2FY13 |
|
|
Revenue Agri-Inputs CSM |
364 â 385 196-204 168-181 |
298 195 103 |
|
EBITDA |
56.8 â 58.5 |
43.63 |
|
PAT |
31.6 â 32.8 |
25.83 |
|
1HFY14e |
1HFY13 |
|
|
Revenue Agri-Inputs CSM |
768 â 789 392-400 376-389 |
536 338 198 |
|
EBITDA |
135.7 â 137.4 |
92.96 |
|
PAT |
80.14 â 81.34 |
49.29 |
Have you guys received the 50 paise interim dividend for which “Book Closure from August 21, 2013 to August 29, 2013” and “Further the Company has informed that, the payment of Interim Dividend for financial year 2013-14 will be paid on or before September 02, 2013 to the eligible equity shareholders of the Company.”
I haven’t.
Yes. Dividend Received on 4 Sep, 2013
My mistake. Just realised, i bought my lot around that time., missed the interim div. by a whisker 
never mind.
Donald/Mahesh,
Really appreciate all your sincere efforts to help me better understand this story. Time to go back to QA again.
Hi Mahesh,
Thanks for clarifying so nicely.
So basically you are saying that at 125-130 Rs & after 1Q results, PI was a good story for Short term & medium term & long term, while at 184, it will be a good story for Medium & long term but not short term (assuming in-line Q2).
Is that right interpretation?
If yes, what are the factors you generally consider on deciding that?
PE, PE v/s past growth, PE v/s forward growth, Historical PE v/s Current, or something else?
Also, it would be great if you can give some examples of good business & for which class of investors they are good purchases at current prices?
Regards,
Jatin
first is Short Term Investors rate
second is Medium Term Investors
third is Long Term Investors rate
Now, from PI point of view, post Q1 nos., the rate at which it was available at was Short Term Investors Rate…184 is the Medium Term Investors rate which is arrived at after factroing in 800 cr. CSm revenue,680 cr. Agri revenue and 9.5 % PAt margins for FY14…As the time goes by, and if Q2 nos. come on expected lines, then 184-200 should be the trading stabilisation range for PI by December’2013…
Hi Jatin,
Post Q1 results, the 130-135 range which persisted for long with good liquidity was a no-brainer and therfore an extremely attractive rate for short term investors…for me short term is 3-6 months, medium term is 6-18 months and long term is beyond 18 months…
Now,above 184 till 200, PI will be attractive to medium term investors as in their holding duration, PI can easily give decent return even at such acquisition rate provided things turn out as expected and there are no substantial surprises on either side…range of 184-200 is majorly determined by PI’s traditional commanded multiples and no significant rerating of commanded multiples is factored in…my FY14 and FY15 estimates are already providedearlier in this thread and as each of the targets on financial front is achieved as also visibility is enhanced the stock price will move on that is the assumption…
However, one thing you need to understand that as the scale of operation of PI will go up and consistency in delivering growth is proved again and again, more long term investors will come into the picture which will let PI command much higher multiples than it has so far commanded…this is the reason why you get blue chip cos. or for that matter well discovered consistently growing mid-cap cos. available at rich valuations…Long term investors ( i am talking about institutional guys ) look the picture differently and discount FY15, FY16 well in advance which is not advisable for investors like us…still, as the company’s growth visibility increases till the level to convince long term investors, the company is bound to gradually start trading at rich multiples; this has happened with many good mid-caps and will eventually happen to PI too and we need to live with that…so far we are fortunate that market sentiments as well as soft projecting approach of management has worked in our favour and we were able to grab PI two times at short term investors rate (one when initiation was done two years before and then post Q1FY14 nos.) and one time at medium term investors rate (last year in November’2012)…lets see till when we are lucky…
With rgds. to your query asto good businesses – any business which you understand well and are able to monitor well are good businesses to invest — what is good for me might not be good for you so that call every individual has to take and build his/her own conviction…in today’s macro environment and volatile market sentiments, good opportunities are rare at decent valuations…
Rgds.
Q2FY14 Estimates of Prominent Research Houses for PI Industries Ltd.
|
( fig. in ` cr. ) |
Edelweiss |
IDFC |
IIFL |
|
Q2FY14e Revenue |
366.6 |
421.9 |
441.4 |
|
Q2FY14e EBITDA |
55.0 |
61.2 |
74.6 |
|
Q2FY14e PAT |
31.1 |
33.9 |
42.6 |
Data Taken from Q2FY14 Preview Reports of respective Research House
My Comment on these Estimates :
Edelweiss seems to be the most conservative one providing reasonable Q2FY14 estimates for PI..... IIFL, which claims to have taken management feel before providing estimates, seems to be the most bullish one expecting 100 % YoY growth in CSM and a 20 % YoY growth in domestic agri-input over the higher base of last year.
I personally feel, it is unreasonable to expect a 20 % YoY growth in agri-input segment for Q2 since FY13Q2 was an exceptional one because of delayed rains....part of that is already covered in Q1 nos.....however, if the company can achieve that, it will be great news for us being shareholders.
Although CSM can turn a 100 % YoY growth, but, it depends on the delivery offtake by the customers... traditionally Q3 and Q4 have been the strongest ones for CSM and not Q1 and Q2...
To sum-up, it will be difficult for the company to better IIFL & IDFC's estimates whereas if co. doesn't better Edelweiss's estimates I will be disappointed.
No. The record date for payment of both interim and final dividends was same.
You are entitled to both the dividends if stocks are bought on or before 16/08/2013 and if you’ve received payment of final dvidend @ Re 1/- per share (paid on 04/09/2013) it means you must’ve also received interim dividend @ Re 0.50 which was paid out on 30/08/2013.
never mind.
Cyclone âPhailinâ today left a trail of destruction, hitting nearly 90 lakh people, damaging over 2.34 lakh houses and laying waste paddy crop worth about Rs 2,400 crore as Ganjam district bore the brunt of the very severe storm, the worst in 14 years to hit the Odisha coast.
Q2FY14 results on 23rd October 2013…2 days post Rallis results…
Rgds.
Hi,
How do you find Dhanuka Agritech in same space? Company is growing well since past few years. Sales/Profit ratio also seems good.
I have talked rgdg. Dhanuka before in this thread too…Mythree concerns rgdg. the company are : Management Quality (not talking here about ethics or corp.govern. but only with rgds. to business) Capability to Scale and Business Model…
Although Dhanuka also might benefit out of the current good agri year and its stock also might run-up which has missed the current rally so far ; but, it will always trade at a substantialdiscount to PI/Rallis, purely because of its business model whose entire strength hinges on only distribution and branding…Management has to show some concrete steps which could be visible over next few years as young members are keen to scale up the co., but, unless such steps are visibile, I will not be invested in this company for the long term…This is my view and everyone has to build his own conviction.
Rgds.
Hello Donald,
Interesting and rich discussion on PI.
It appears that PI wants to increase CSM more than agri busines due to stickyness and better margin. CSM looks like an outsourcing work to me for Innovator companies. Innovator finds contracting cheaper as well as immune from environmental issues which would be costing far higher in developed countries.
I am struggling to figure below out:
-
How big is this opportunity? Do we know any similar player in lead role across the world and their MCAP?
-
I understand CSM is not pure play for low end outsourcing and contractor needs some domain exeprtise too. Who are the competitors in 3rd world like China?
Intnetion is to figure out how much MCAP could grow and how scalable is the opportunity for PI.Any business to grow, scalable opportunity should exists irrespective of how good/capable is the management.
Thanks.
Key takeaways from Rallis analyst meet held today :
1). 2013 monsoons are the best India has seen over last many years…agchem industry in particular is very optimistic and has filled up the system with high stocks in anticipation of robust kharif
2). However, because of constant rains, many sprays have been missed by the farmers…also, there has been flood like situation in Gujarat, western up, Bihar and part of mp which has also partly affected the agri segment in general…phalin has also contributed to adversities and industry expects in general severe damage to cotton, coconut & cashew crops in ap and Gujarat…rabi sowing has also been delayed.
3). Talking specific to Rallis, q2fy14 has been one of the best qrtrs company has seen over last many years ( body language of the management was very positive )…rabi is expected to be robust as the moisture level of soil is best in many years and water level in reservoirs have been more than adequate…rabi sowing is slightly delayed but is expected to gather steam soon…
4). Rallis is repositioning itself as a complete agri-solutions co. rather than crop protection co. and this is expected to deliver rich results in years to come…staff is made competent to interact with farmers and help him at every stage…weekly data is gathered Rgdg. Rains, crops, etc . In each area and likely pest incidence, product best suited to tackle that incidence, etc. all knowledge is provided to farmers on real time basis which makes farmer glued to Rallis…also, Rallis is now providing basket of products starting from seeds, fertiliser, pesticides, etc., even if they are not from Rallis table so asto ensure that farmer doesn’t have to go anywhere else…at present, Rallis has covered 1.2 mn. Farmers under this initiative and is expected to add farmers aggressively going forward…120 mn. Farmers are the addressable market and co. expects 60-70 % revenue from this initiative 4 years down the line…
5). Rgdg. Seeds business, co. expects good sales momentum from this business in next two years but as a strategy doesn’t want to go overboard on this business as co. sees this business as volatile which could give exponential growth within few years and then stagnancy in revenues could creep up…co. is using seed business as a tool to become complete agri solutions co.
6). Institutional business is now only fraction of the revenue now with majority of revenues coming from retail…30 % of the revenues are from generics…majority of th growth in domestic business is volume driven…
7). Dahej facility now has the capability of all chemical reactions except few…
8). Rallis group entity advinus is focussing on Csm and Csm contracts are passed on to it…Rallis has a 16 % stake in the entity.
Hi Manish Okhade,
1). CSM is certainly a scalable opportunity for many years to come. There are enough pointers as to why in Management Q&As. Please read the 2 Management Q&As with PI Industries - links on this page itself - above
2). In the space that PI is in, there is no Chinese competition. For many molecules they are the dominant supplier among 2-3 suppliers at most. Competition is mostly from developed economies with a much richer CSM history/pedigree but also higher cost structures - Some Companies in europe like Saltigohttp://saltigo.com/, Lonza http://www.lonza.com/custom-manufacturing/chemical-manufacturing/advanced-chemical-synthesis-acs.aspx