MOSL: PI INDUSTRIES (Upgrade to Buy)-A miss on most fronts, but expect back-ended growth in FY18
PI Industries: A miss on most fronts, but expect back-ended growth in FY18; 2HFY18 to see moderate growth
(PI IN, Mkt Cap USD1.8b, CMP INR822, TP INR988, 20% Upside, Buy)
- Results below expectations: Revenue grew 10.2% YoY to INR5,377m (est. of INR6,004m) in 3QFY18. EBITDA margin shrunk 170bp YoY to 19.5% (est. of 22.0%), led by an increase of 212bp YoY in other expenses and 95bp in raw material cost. Agri revenue was impacted by unusual rains in states like Chhattisgarh, Telengana and Karnataka, and also by GST-related hiccups. CSM business was hurt by supply disruption from China and higher raw material prices. EBITDA rose 1.4% YoY to INR1,048m (est. of INR1,322m), primarily due to higher raw material cost and an adverse product mix in the agri segment. Consequently, adj. PAT fell 14.2% YoY to INR806m (est. of INR970m) from INR939m in 3QFY17.
- FY19 recovery prospects appear bright with CSM as the key driver: Noting that growth in 3QFY18 was hurt by raw material supply disruption from China, we expect some revenue spillover to 4QFY18. PI has reduced its dependence on Chinese supply from 30-35% previously to ~18% now – it aims to bring down this proportion further over the next 18 months, and will also look at backward integration. Order book in CSM remains strong at USD1.15b. Also, in the agro segment, PI plans to launch three new products (rice insecticides, vegetable insecticide and wheat herbicides) in FY19.
PI Industries Limited is a holding company. The Company is engaged in the manufacturing and distribution of agro chemicals. Its geographical segments include Sales within India and Sales outside India. The Company manufactures agrochemicals, plant nutrients and plant protection, specialty fertilizers and hybrid seeds. It offers insecticides under various brands, including LEPIDO, DODGER, COLT, OSHEEN, COLFOS, FOSMITE, JUMBO, FORATOX, CARINA, MAXIMA and VIBRANT. The Company offers fungicides under brands, which include CUPRINA, LURIT, KITAZIN, SANIPEB, CLUTCH and LOGIK. It offers herbicides under the brands, including SOLARO, NOMINEE GOLD, INRO, BINGO, PIMIX, BUNKER and MELSA. Its specialty products include BIOVITA Granules and BIOVITA Liquid. The Company provides services in various areas, including contract research, process development, analytical method development, process safety data generation and process detailed engineering.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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