PI Industries - Superior Business Model

Decent set of numbers from PI given the inventory build up and competition coming in key products. In the investor presentation, management has guided 15% growth, reducing from 18-20% being mentioned earlier. Looks like there will be slower growth for the next few quarters, need to wait for the con call tomorrow to get further details.

disc- invested and remains one of my top 3 holdings

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As per PPT - https://www.bseindia.com/xml-data/corpfiling/AttachLive/f0ce5213-df5c-4d98-a57e-6c840b6364ab.pdf

Slide 17 - targeting to achieve ~15% revenue growth with sustained improvement in profits.
On congervative if we consider 15% revenue growth with same profit margin of 22%, EPS of FY 25 is 127.6, with that EPS forward PE comes to 28. Seems cheap with PI quality.

Disc: Invested and views are biased.

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Over the last 6 years promotors have reduced stake from 51.35% to 46.09%. Going below 50% ownership does not instill faith. Did management provide any commentary on this?

Is it due to promoter’s selling?
No, mainly it is due to QIP that company done for fund raising.

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PI had a softer quarter, with sales growing by 11% and EPS by 32%. They are guiding for 15% sales growth in FY25 with similar margins but higher tax rates which might keep EPS muted in FY25. Besides that, they have grown very well in this downturn and have clearly differentiated themselves from other agchem/chemical cos. Concall notes below.

FY24Q4

  • Targeting 15% sales growth in FY25 and higher growth (18-20%) starting FY26; 49-50% gross margins and 26% EBITDA margins

  • 70% of CSM growth in FY24 came from new molecules commercialized in past 3-years

  • New products: 7 (domestic), 6 (CSM); 8-10 in CSM in FY25

  • 6% revenue drop in domestic agchem in FY24 (29% growth in biologicals)

  • Higher tax rate in FY25 (24%)

  • Weaker pharma revenues due to deferral of customer orders (315 cr. vs 563 cr. In FY23). Investments will happen for the next 1.5 years after which EBITDA margins will increase

  • FY24 capex : 1080 cr. (including 490 cr. for pharma acquisition); Plan 800 cr. In FY25

  • Order book increases to $1.75bn

Disclosure: Invested (position size here, no transactions in last-30 days)

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