Thank you Mahesh. Your passion for sharing knowledge is encouraging us to read, grasp and contribute whatever small way possible.
IMD (India Meteorological Department) projects below normal rainfall (90%) for Aug-Sep months. According them Jun-Jul months are reasonably good across the country with excess rainfall in some states like Rajasthan, UP, MP and and West Bengal. We need to see how PI will manage or exceed their growth projections of 40% Q2FY12 if this turns out to be true. This is only risk presently I see.
Overall I agree with your reasonably conservative estimates for FY12.
Nice to have your comments and endorsement mastersir.
About PE rerating keeping pace with earnings, my feeling is that even if it rerates to a PE of about 20 in next 2-3 years inspite of earnings growing 40% CAGR from here, this could turn out to be a big winner.
I saw some friends trying projections on likely eps and PE for 2-3 yrs down the line. Trying it in PI gives foll projections
financial year eps pe price
fy 11 57 11-13 600-700
fy 12 80-90 12-15 950-1350
fy 13 120-130 15-20 1800-2500
**
**
Picture for fy 12 will be slightly more clearer after q2 fy 12 as the second quarter is likely to be the best quarter.
Some key monitorables include:
1). Progress of monsoon
2). Starting of operations at new facility in Sterling SEZ
3). Overall condition of general markets
4). Any progress/new development coming out of Sony-PI joint venture.
GCā¦ already I have explained in much detail rgdg. the prospects of PI in my āConclusionā post key takeaways from the Q1FY12 concall as well as my 28th July reply to Vinod so will not go into it againā¦
Rgdg. your query, 125 cr. CAPEXshould suffice the growth requirement for coming 3-4 years but if company wants to do really big in CSM business it will have to invest further either organically or inorganically since its a asset-heavy businessā¦Now, whether the funding will come via internally or externally will depend on the extent of cash flows generated and FY12 will be a real decider for the same.
Now, rgdg. your take that p/e expansion will not happen soon, I differ here as my analysis as well as my understanding of many companies over last 12 years makes me believe that Pi is due for a p/e expansion on the bourses and visibility of even a small but concrete positive long term trigger can initiate this processā¦ A company, which because of its low i.e. just 10 % floating stock should command a scarcity premium is available at discount in real senseā¦ This canāt happen atallā¦ Yes- if the company had a risky business model or operating at low margins or paying low taxes or having shaky management then this discount was justified but look what is the realty - company is having one of the best management as well as one of the most respected board of directors, is having a grest derisked as well as unique scalable business model, is working on decent margins, paying highest taxes as well as demonstrating growthā¦ Now, this scenario to remain when company is on verge of crossing 1000 cr. revenue mark is impossible and FY12 should be the trigger for the expansion of multiples to kick-startā¦ Why this could happen, there is also a technical factor for itā¦ Std.Chtd. PE which has taken 15 % stake in the co. (although at much lower rate) will look for exit from the company in 2013 or latest 2014ā¦ By then it will have to popularise the company in financial fraternity and make people convince of its business model so that its 15 % stake can get very well absorbedā¦ Also, by then co. should have achieved around 1800-2000 cr. scale so the process which is going on gradually at present after every qrtr. will suddenly gather pace once FY12 visibility or some inorganic move is there by the company because the multiples given for such unique business model co. with good growth visibility is much higher than that commanded by it at presentā¦ so there should be i-first attitude which should make the multiples overshoot as has happened in case of consumption stocksā¦
From present rate, even if company performs with only 40 % growth in FY12 or 30 % growth in FY13, investors have nothing to looseā¦ but in case it outperforms this growth then there is a chance of it getting appreciated to much higher levels and make current rate a history.
Having said all these, I must say we need to reassess the situation on every developmentā¦
Its just the reclassification of shareholdingā¦ In 23rd April shareholding Foreign Venture Capital Funds (holding 3.46 %) were under Institutional Category and in the latest June shareholding, they are under Foreign Corporate Bodies categoryā¦
Otherwise I donāt see any major change in the shareholding except some minor 16000 shares profit booking by FIIs and 6000 shares by corporate bodies while we can see the increase of 23,000 shares in HNI category each holding more than 10,000 shares and 1,000 shares in retail category each holding less than 10,000 sharesā¦
Hence, you are misinterpreting the shareholding pattern and actually its a healthy trend of shares going in stronger handsā¦
Last few days provided opportunity to accummulate more of PI Industries:). I also updated my projections for the stock, as below:
PI
Industries
2009
2010
2011
2012E
2013E
Growth
17.34%
32.51%
25.00%
30.00%
Total
Sales
462.61
542.82
719.30
899.13
1168.87
Agri Inputs
420.00
584.43
701.32
CSM
250.00
314.70
467.55
Polymer
49.30
-
-
Segment
Contribution
Agri Inputs
0.00%
0.00%
58.39%
65.00%
60.00%
CSM
0.00%
0.00%
34.76%
35.00%
40.00%
Polymer
6.85%
-
-
EBITDA
64.32
87.44
123.62
170.83
233.77
EBITDA
Margins
13.90%
16.11%
17.19%
19.00%
20.00%
Depreciation
11.49
13.12
15.59
18.08
23.50
Depreciation/Sales
2.48%
2.42%
2.17%
2.01%
2.01%
EBIT
52.83
74.32
108.03
152.76
210.27
Interest
22.28
18.31
18.19
21.83
28.37
Interest/Sales
4.82%
3.37%
2.53%
2.43%
2.43%
PBT
30.55
56.01
89.83
130.93
181.90
Taxes
7.46
15.07
25.72
37.48
52.07
Tax rate
24.42%
26.90%
28.63%
28.63%
28.63%
PAT
23.09
40.95
64.12
93.45
129.83
Net
margins
4.99%
7.54%
8.91%
10.39%
11.11%
# of
Shares
0.70875
0.70875
1.11875
1.25242
1.25242
EPS
32.57
57.77
57.31
74.62
103.66
Ajusted
EPS
18.43
32.69
51.19
74.62
103.66
Adjusted
EPS growth
77.36%
56.59%
45.75%
38.93%
P/E
17.17
13.19
9.49
P/Sales
1.53
1.37
1.05
Mahesh,
I had some further questions/observations. Please comment
1. Management has guided for 100-150 basis improvement in EBITDA margins (FY11 ~17%). However all workings would point to much higher margin expansions, given that 1) the lower margin polymer business (~10%) is disposed off and 2) Product mix is improving towards CSM and 3) Volume led and better realisations from Agri-Inputs segment itself.
This is borne out by 1QFY12 results clocking ~21% EBITDA.2 new product introductions in Agri-Inputs business in subsequent quarters, is likely to temper margins down a bit.
Your comments, please
2. Increasing Working Capital burden - This was contested by Management as 31st Mar picture is not representative (look at Interest costs actually lower for the year) and things would be back to normal in 2 months. The details in Q1FY12 Concall (Inventory 185 cr, Sundry Debtors 146, I assumed Sundry Creditors would have increased with Increase in Sales) would suggest Working Capital is back to ~20-21% Sales, which if maintained would be nice.
Yr comments, please
3. CSM business - Trying to understand the dynamics & potential from this segment
Usually custom synthesis business is characterised by low volume, high realisations. Off-takes of patented molecules pre-commercialisation is in Kgs. And commerical contract manufacturing (CRAMS) sees lower realisations but volumes in Tonnes.
Any idea of the off-take sizes of the molecules from Japanese and European customers. (Kgs/Tonnes). What stage are they in, when likely to move to large scale CRAMS. Any of the molecules already in large scale commercialisation?
I am splitting the questions in 2 parts, for easy following by others. Next set of questions in next post.
The next set of question for your comments, please.
4. 125 Cr capex for SEZ - Coming up by Q4FY12
Management indicated the annual revenue potential from this Capex size if some 325 Cr. The existing facility did 250 Cr CSM in FY11. A 40% growth in CSM for FY12 would mean doing about 350 Cr from existing facilities. That's an annual CSM revenue capacity of ~700 Cr from FY13 onwards.
Given a order book size $340 mn or ~1500 Cr to be executed over 4 years, it seems there is adequate capacity for atleast 2-3 years even if the order book keeps growing at this rate.
What are your comments? when will next round of Capex be required?
5. Debt situation - 1QFY12, Total debt is down to 133 Cr (D/E 0.63)
I assume they have used up the proceeds from sale of Polymer division (~76 Cr). 30 cr was booked in profits so some 46 cr was utilised to reduce debt. The rest of the debt reduction came from working capital reductions from debtors easing up. So that would still leave the Capex of 75-100 Cr to be incurred for the year. So total debt situation is likley to be at ~200-210 cr levels, D/E would still be <1?
6. Equity Capital base - Equity Capital has expanded rapidly in last 2 years, although bulk of it seems to be through the 2 bonus issues.
Year
EquityCapital
Remarks
201104
12.52
Debenture/Preference Conversion
201007
11.19
Bonus Issue
201006
7.46
Preference Share Conversion
200903
7.09
Bonus Issue
199203
3.54
Equity Shares Issued At Par
Any further debenture/preference conversions in the offing in the near future?
7. Finally Projections - They should do between Rs.70-80 EPS in FY12 as per my workings above.
Please have a look at my workings. Do you have any different figures? Even with a 21% EBITDA margin EPS would touch ~Rs. 84.I cant see a Rs. 90-100 EPS for FY12.
Nice to see u finally take interest in this company after a lot of goading.
Coming to some of ur queries, as Mahesh is the expert here, I think he would be best placed to answer those.
Now, coming to capex for SEZ, if u see the custom synthesis business is just about to take off and I think the SEZ facility is there for meeting future and some amount of current demand. Plus it will be some kind of specialised facilities to meet with different kinds and sizes of demand from their customers.
Regarding high vols in the custom synthesis, I think it comes later on once the initial orders are met with and the molecule launched becomes a big success. Once this happens the higher volume orders will come into play.
Debt issue---- here the management has walked its talk. You can go thru the q4 fy 12 transcripts and they have done exactly as predicted there. so debt should not be a big issue looking at the size the company is attaining.
Regarding projections you need to take sales figures at 1000 crores and go with projections. I think sales would be in excess of that figure. For fy 11 sales was around 720 crores and with 40% growth projected it should cross the 1000 crores figure. And first quarter figures seem to be pointing in that direction. But second quarter will be the most definite indicator in helping pinpointing the sales figure. But I am not too worried here about that because what they will not do in fy 12, they will make up in fy 13.
The theme here is the quality of business, visibility of strong growth, the stature of the company and management where they get CSM orders for freshly patented molecules. And above all the valuations for such a strong growth story. And throw in some scarcity premium and it makes for a heady investment cocktail.
Sabra ka fal bhi Meetha! All thanks to Mahesh, and especially your conviction!
Re: 40% growth in revenues as projected by Management, or 1000 Cr Sales
1Q 58% sales growth is not indicative as it is on a low base from 130 Cr last year. In Q2 they had done 187 cr last year, so they will need to do atleast 260 Cr plus and keep upping the ante each Qr till the end of the year.
I will wait to revise revenue growth estimates, post Q2.
Re: Heady cocktail:)
To get a perspective on things, the size of the opportunity in CSM is important to establish. As also proper peer comparison on the agri Input business with Rallis India, United Phosphorus, and others. Agri Inputs industry grew at 14-15% last year.
Once that is done, I may turn as bullish as you are. Till then its homework time!
[quote="Donald, post:74, topic:967028734"]
1Q 58% sales growth is not indicative as it is on a low base from 130 Cr last year. In Q2 they had done 187 cr last year, so they will need to do atleast 260 Cr plus and keep upping the ante each Qr till the end of the year.
I will wait to revise revenue growth estimates, post Q2.
To get a perspective on things, the size of the opportunity in CSM is important to establish. As also proper peer comparison on the agri Input business with Rallis India, United Phosphorus, and others. Agri Inputs industry grew at 14-15% last year.
Once that is done, I may turn as bullish as you are. Till then its homework time!
[/quote]
Hi Donald,
Before starting, let me first commend you for the way you go deep into a company and raise all possible doubts that might come into one's mind... this in a way puts the company to litmus test and the chances of faltering in analysis gets reduced considerably...... Its really impressive and I need more members like you to reply and ask on my tracked cos.... Its my pleasure to reply to each of ur. queries to my utmost ability.....
I will reply to each of your queries 1-by-1 but Last thing first Donaldwith rgds. to ur. reply to Hitesh.... I would like to ping in here a bit... (my take in bold)
Ans. - I agree with you that to revise FY12 estimates Q2FY12 has to go through but differ with your contention that Q1FY12 performance was on lower base and so looks easy to achive.... Here, you have not factored in the fact that polymer business is now notthere in numbers which was there in the low base you are talking about of last time which compensates for the 28 % degrowth the company had shown in CSM business last year.... In number terms if u see, it exactly matches the polymer revenue....
Also, Agri-input segment has consistently grown in this time period from Q1FY10 's 55 cr. to Q1FY11 's 78 cr. to Q1FY12 's 145 cr. with expanding margins.....Traditionally this has been the waeakest qrtr. for pi's agri-input segment.... But, to be on a safer side we need to wait for Q2FY12 numbers to be out....
Ans.- Again, you are right here in your saying that agri-input space has grown by 15 % last year and so everybody must have grown but what we need to see here is that how PI has grown vis-a-vis others to assess the effective management and future possible growth... Here, I have made one peer analysis for you which is given in following table....
Q1FY12 Sales Growth
Q1FY12 EBITDA Growth
Q1FY12 Margins
FY11 Sales Growth
FY11 EBITDA Growth
FY11 Margins
P/e on EBITDA (FY11)
Mcap-to-Sales
(FY11)
P.I. Industries
(Agri-Input)
84 %
(145 cr.)
108.70 %
19 %
38 %
(410 cr.)
42 %
16.5 %
9.09
(**16.66)
1.89
(**3.07)
Rallis
46.54 %
(297.5 cr.)
81.6 %
13.94 %
21.42 %
(1093 cr.)
13.78 %
18.21 %
15.9
2.89
Insecticides
24 %
(121.81 cr.)
31.63 %
10.41 %
20.42 %
(477.9 cr.)
27.77 %
9.42 %
10.26
0.96
United Phos.
26.83 %
(1862.14 cr.)
19.5 %
18.5 %
6.33 %
(5804 cr.)
11.61 %
19.13 %
6.21
1.22
Dhanuka
17.06 %
(94.85 cr.)
15.21 %
16.68 %
20.76 %
(493.58 cr.)
33.5 %
15.92 %
6.8
1.08
Bayer
9.74 %
(790.9 cr.)
7.57 %
10.39 %
24.06 %
(2139 cr.)
3.25 % (15.15 %)
10.51 % (11.72 %)
14.37
1.51
Divis
35.43 %
(364.8 cr.)
30.71 %
36.73 %
36.74 %
(1318 cr.)
17.51 %
38.12 %
20.44
7.79
P.I. Industries
(CSM)
83 %
(62.1 cr.)
86.11 %
22 %
23 %
(256 cr.)
23 %
21 %
9.09
(**20.96)
1.89
(**4.9)
Now, from this table, it is evident that when the industry last year gew by 15 % , all the players grew near to that but Pi outperformed all others by growing 38 % which was the higest in the industry..... This same trend has continued in Q1FY12 when every player grew with Rallis highest because of its inorganic initiatives (seed business), but PI even outperformed Rallis by growing almost double that of Rallis....
Now, in Q1FY12, if you observe closely, PI has already outpaced Dhanuka and Insecticides.....One more good qrtr. and outperformance and PI will outpace Insecticides and Dhanuka to become India's 4th largest listed agrichemicals playerafter UPL, Bayer and Rallis...
The most important point to note here is that each of the other big player had to go for inorganic initiatives to grow and PI is doing it purely organically.....
**Now, I will come to valuation parameters included in the table... to able to assess properly, what I have done is valued the cos. based on EBITDA multiple rather than PAT multiple.... The figures given in bracket for PI indicate purely EBITDA multiple and mcap-to-sales from that segment and if both the segments are combined then the valuation comes to that given w/o brackets....
Also, here, apart from listed agriinput players, I have included Divis as CSM segment business model of PI is somewhat similar to Divis....
Rgds.
Hiteshbhai
Sabra ka fal bhi Meetha! All thanks to Mahesh, and especially your conviction!
Ans. - The EBITDA margins that you have assumed in your projections are fair as going forward the key monitorable is CSM segment contribution as far as margins are concerned because management has guided for 40 % growth in this segment which comes to 350 cr. + and margins are better hereā¦ As far as agri segment is concerned, how far they can manage high margins with intelligent raw material management is to be seen and going forward for next qrtrs. revenues should be the concern of the management rather than marginsā¦
2). ** Working Sales, **
Ans. - Here again, unless the nature of new launches is not clear it will be very difficult to gauge the wc requirement as if they are major blockbuster launches and excessive field education in addition to the set-up they have is required then it will consume more and if they are related to thier major crop like rice then requirement will be much less and revenues will come much faster if the product is usefulā¦Frankly speaking, balance sheet and internals is not a concern now as majority of foundation for both the businesses is built and a healthy order-book is in handā¦
3).
Ans. - When you look at PI you need to look at it differently and not like other CRAMS or CSM player because its an integrated player with multi-product plants and not plants dedicated to single productsā¦The revenue and profits that accrues to PI are from the entire lifecycle because from the day the product is patented, PI is involved till commercialisation, majorly on process research and secondly on supplyā¦ In all the assignments it is closely involved with the inventer and since the molecules are volatile and are in an unchartered territory because of new invention, revenue potential for each molecule is fixed but not the durationā¦ This is the reason why, all the risks are borne by the inventor and what PI has to do is to research and deliverā¦ Now, if we look at other angle that if molecule is not a success then what will happenā¦ so far such thing has not happened but if such thing happens then also contract provides for the fixed revenue, if not from that molecule then from other molecules from the inventorā¦ Each Inventor or Innovator co. is working on multiple assignments and molecules with PI and so it can very well compensate for the failure of other moleculeā¦ The revenue potential of each of the molecule is 10 mn. USD. as is already said in my conclusion post Q1FY12 concall alsoā¦
With rgds. to commercialisation, Last year already 4 molecules have gone for commercialisation but the scale will depend on their successā¦ As you must be aware, at this stage only 2 or maximum 3 cos. are involved with innovator co. and so if its a success the scale will be higherā¦However, to be on a safer side, its fair to assume that each molecule has a revenue potential of 10 mn. USD for PI.
Now, with rgds. to the size of opportunity, its actually huge as worldwide there are only few cos. adopting the business model similar to PIā¦ at any particular time as of now there are 25-30 molecules under evaluation in PI and if the success is met, (the % is high because of the expertise of management and capability of team) it converts into order-bookā¦ However, few years down the line, PI has to have 120-150 molecules under evaluation at any stage and from that you can gauge the opportunity CSM segment has for PI.
Rgds.
Last few days provided opportunity to accummulate more of PI Industries. I also ā¦
[quote="Mahesh, post:75, topic:967028734"]
Again, you are right here in your saying that agri-input space has grown by 15 % last year and so everybody must have grown but what we need to see here is that how PI has grown vis-a-vis others to assess the effective management and future possible growth... Here, I have made one peer analysis for you which is given in following
|
|
|
|
|
|
|
|
P.I. Industries
(Agri-Input)
|
84 %
(145 cr.)
|
38 %
(410 cr.)
|
1.89
(**3.07)
Rallis
|
46.54 %
(297.5 cr.)
|
21.42 %
(1093 cr.)
|
24 %
(121.81 cr.)
|
20.42 %
(477.9 cr.)
|
0.96
United Phos.
|
26.83 %
(1862.14 cr.)
|
6.33 %
(5804 cr.)
|
17.06 %
(94.85 cr.)
|
20.76 %
(493.58 cr.)
|
9.74 %
(790.9 cr.)
|
24.06 %
(2139 cr.)
|
3.25 % (15.15 %)
|
10.51 % (11.72 %)
|
35.43 %
(364.8 cr.)
|
36.74 %
(1318 cr.)
|
7.79
P.I. Industries
(CSM)
|
83 %
(62.1 cr.)
|
23 %
(256 cr.)
from this table, it is evident that when the industry last year gew by 15 % , all the players grew near to that but Pi outperformed all others by growing 38 % which was the higest in the industry..... This same trend has continued in Q1FY12 when every player grew with Rallis highest because of its inorganic initiatives (seed business), but PI even outperformed Rallis by growing almost double that of in Q1FY12, if you observe closely, PI has already outpaced Dhanuka and Insecticides.....One more good qrtr. and outperformance and PI will outpace Insecticides and Dhanuka to become India's 4th largest listed agrichemicals playerafter UPL, Bayer and most important point to note here is that each of the other big player had to go for inorganic initiatives to grow and PI is doing it purely
[/quote]
Dear Mahesh,
Thanks a lot for the numbers on Peers...saved me lots of time:)
Agri-Inputs segment: Its evident that PI is outpacing everyone. I want to spend more time knowing why it is able to do so. Products, Business models, and the sudden ramp up by PI in this segment in the last 2 years. Understanding that will provide some clues to sustainability!
I would also like to see a comparison of PI numbers with Others in FY08 and FY09. This might establish that only with introduction of Nominee Gold in FY10, the graph of PI started changing. If you have the numbers collated, please share.
[quote="Donald, post:72, topic:967028734"]
125 Cr capex for SEZ - Coming up by Q4FY12
Management indicated the annual revenue potential from this Capex size if some 325 Cr. The existing facility did 250 Cr CSM in FY11. A 40% growth in CSM for FY12 would mean doing about 350 Cr from existing facilities. That's an annual CSM revenue capacity of ~700 Cr from FY13 onwards.
Given a order book size $340 mn or ~1500 Cr to be executed over 4 years, it seems there is adequate capacity for atleast 2-3 years even if the order book keeps growing at this rate.
What are your comments? will next round of Capex be Debt situation - 1QFY12, Total debt is down to 133 Cr (D/E 0.63)
I assume they have used up the proceeds from sale of Polymer division (~76 Cr). 30 cr was booked in profits so some 46 cr was utilised to reduce debt. The rest of the debt reduction came from working capital reductions from debtors easing up. So that would still leave the Capex of 75-100 Cr to be incurred for the year. So total debt situation is likley to be at ~200-210 cr levels, would still be
[/quote]
Find my replies in bold .....
4. when
required?
Ans- There are two aspects to it..... First.... If we assume the conditions remain as they are now then purely on organic basis, the new capex might be required post-FY14, the raising of which could happen in FY13-end or FY14...(Now, to go to second aspect----)
However, I don't think this is feasible for a company like PI as it can't remain content with the growth and should surely seek some inorganic cos. in R&D space post stabilisation of new plant, this is because in the field in which PI is establishing its name and plans to do really big, it has to continuously have new R&D capabilities (I am talking about operational areas)..... So far expertise of management in agri space has dominated both the business segments and is largely responsible for growth... Going forward it has to diversify and the next phase of growth will be driven by that.....
In addition, Sony-PI centre also will be about to bring something fruitful by FY14 for which PI will be a joint patent holder as well as the biggest supplier... this will be really a milestone for PI as this will be the first product/s for which PI will be involved right from the invention and it will throw open huge untapped market for PI... For this too it might need CAPEX (to set-up a sort of dedicated plant or something)....
Thirdly, Agri-input segment has to see some acquisition, especially in seed space, as without that company will not be able to take the competition head-on... This acquisition could happen either in this fiscal or next... But here again it will be unique one as in Q1FY12 concall management has indicated clearly that whatever PI will do will be different and very unique than what competition does...
We need to monitor the size of acquisitions as well as each and every development but unless mcap is 1.5-2 times current level I don't think equity issuance will be there....
5. D/E <1?
Ans.- It is safe to assume that Debt levelshould not change much from last fiscal's levels....if reduction is there it will be a positive but for a 40 % growing co. with EBITDA margins 17% + on a 700 cr. base, 250 cr. debt is comfortable...
6. Equity Capital base - Equity Capital has expanded rapidly in last 2 years, although bulk of it seems to be through the 2 bonus issues.
Year
EquityCapital
Remarks
201104
12.52
Debenture/Preference Conversion
201007
11.19
Bonus Issue
201006
7.46
Preference Share Conversion
200903
7.09
Bonus Issue
199203
3.54
Equity Shares Issued At Par
Any further debenture/preference conversions in the offing in the near future?
Ans.- As of date, no conversion is pending and the shareholding you see as of 30th June is final with nil conversion pending.. all the OCDs and CCPS are converted and equity is raised to 12.52 cr. and I don't think FY12 will see any further equity issuance.
7. Finally Projections - They should do between Rs.70-80 EPS in FY12 as per my workings above.
Please have a look at my workings. Do you have any different figures? Even with a 21% EBITDA margin EPS would touch ~Rs. 84.I cant see a Rs. 90-100 EPS for FY12.
Ans.- CSM segment revenues in your working are ok but agri-input space reveues are I think on a lower side and depreciation should rise considering the plant gets operational this fiscal....Hence, I will refrain from projecting anything as it might look over optimistic at this stage.....let Q2FY12 pass and lets see the effect of monsoons further....
Any further queries are welcome....
Rgds.
Mahesh,
The next set of question for your comments, please.
[quote="Donald, post:77, topic:967028734"]
P.I. Industries
(Agri-Input)
> Dear Mahesh,
>
> Thanks a lot for the numbers on Peers...saved me lots of
[/quote]
Hi Donald,
Please find the table attched with rgdg. to growth in agri-input segment of all players from FY07...
FY10 Sales Growth
FY09 Sales Growth
FY08 Sales Growth
FY07 Sales Growth
P.I. Industries
(CSM)
41 %
88 %
35 %
3 %
7 %
10 %
15 %
27 %
Rallis
5.18 %
23.06 %
8.01 %
11.48 %
Insecticides
34.91
32.2 %
NA
NA
United Phos.
10.47 %
32.21 %
52.2 %
37.12 %
Dhanuka
21.13 %
35.3 %
23.8 %
NA
Bayer
16.28 %
19.27 %
NA
NA
Now, here again I will request you to go in detail and study whole agri-chemical space.... you see the growth depends on many factors like new product launches, crop patterns, monsoons, etc...Also, in some cases many inorganic developments have hapened (in most of the companies including Dhanuka except PI) to achieve growth.....Also, the quality of financials in some cases (Insecticides India) is not good and doubtful....
Now, your take on Nominee... yes, no doubt its launch changed the fortune for PI but its the groundwork that was there before the launch which is important than actual launch... Even before Nominee Pi was known for its Vegfru and Biovita brands but mostly in generic space.... from Nominee started the innovative world and its because of this the new product launches that PI is planning are important....if atall one of the product launch happens soon and is a big potential like Nominee then Pi could easily reach Rallis revenue mark very fast.....
The way you are comparing the numbers of peers apple-to-apple is factually incorrect as lot of groundwork goes for growth itself and so the colour of each co.'s growth is different.... If you want to predict growth then you need to study the agri-chemical sector study the crop patterns, monitor the progress of monsoons, assess the products when they are launched as also assess the field in which they are launched, etc. ....
Thanks again for the growth numbers. I meant overall numbers, but donāt bother I am doing that myself.
By the way I am not playing a devilās advocate yet, time for that will come later. Right now I am just trying to understand PIās success.
My intention is to catch what made PI stand-out, what did they do differently from others, and since when? I was guessing that a Bio-Vita or Vegfru could not have given PI much of differentiation or premium or growth than what competition had.
Just out of curiosity whatās in Nominee Gold that in 2 years it is close to becoming the largest selling herbicide in India.Its off a patented molecule fine and Universities are recommending that fine, but what does it offer to Farmers that no other competing product can or even come near?
Thatās a remarkable record by no means. If this is a replicatable model, we better understand it - the dynamics behind the quick market share climb. Unmatchable product benefits (no competition), backed up by huge efforts in market development and farmer education, after all the farmers need to see the benefits firsthand to think of investing in it. And what of the price points, end of the day its gotta be price competitive for India. And why canāt a Rallis replicate what PI is doing, for example.
Your patient answers as usual, will help educate fellow members and transfer the conviction to more folks.
Thanks Mahesh and Donald for your brainstorming. Nice to see really great quality of discussion on the company in question and comparision with peers.
And appreciate the way donald goes in depth into any company he undertakes to study.
In my case I usually look at the story and financials and if I get good vibrations and feel about the company I buy it and thats what I did with PI. Lets hope the party continues.
Sabra ka fal bhi Meetha! All thanks to Mahesh, and especially your conviction!
Sabra ka fal bhi Meetha! All thanks to Mahesh, and especially your conviction!