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MOSL: PI INDUSTRIES (Buy)-Growth to normalize post recovery in global Agri-Chem. Market

​PI Industries: Growth to normalize post recovery in global agchem market

(PI IN, Mkt Cap USD1.5b, CMP INR713, TP INR894, 25% Upside, Buy)

• GST transition disrupts growth: PI’s overall revenue fell 14.4% YoY to INR5,848m (est. of INR7,517m) in 1QFY18. EBITDA margin shrunk 190bp YoY to 22.3% (est. of 25%), led by higher other expenses (+300bp YoY) and employee cost (+210bp). EBITDA declined 21% YoY to INR1,304m. Consequently, adj. PAT fell 21% YoY to INR1,001m (est. of INR1,283m).
• Soft product uptake; demand to normalize in 2HFY18: 1QFY18 witnessed deferment in product uptake, despite better monsoon and higher major crop acreages, on account of GST transition. Domestic revenue declined 17% YoY to INR2,848m, while exports fell 12% YoY to INR3,000m. PI, however, expects the global companies to pump up their inventory in 2HFY18 as the global agchem market recovers, normalizing exports. The company continues investing in R&D capabilities to drive new product introductions, keeping itself ready for any normalization in growth momentum.
• Product pipeline stands strong: PI is well on track with its new products, as witnessed by the launch of ‘ELITE’, a maize herbicide, in partnership with BASF. The company also introduced two rice fungicides – ‘HEADER’ and ‘FENDER’ – and is expected to launch two more products in FY18. PI is set to leverage its collaborations and JVs to further strengthen its product pipeline, allowing better execution of its order book (stands at USD1b) to garner more share in the market.