MOSL: ANNUAL REPORT THREADBARE (ART) | P I INDUSTRIES FY18-A muted year after robust performance of past years
ANNUAL REPORT THREADBARE (ART) | P I INDUSTRIES FY18: A muted year after robust performance of past years
PI Industries’ (PI) FY18 annual report highlighted some dents in the operating performance, led by a slew of cyclical factors. Consol. revenue was flat at INR22.8b, while EBITDA declined 11% to INR4.9b. EBITDA margin shrank 263bp to 22%, primarily due to a rise in revenue expenditure on R&D. Notably, this comes after a stellar show over the last four years. The CAGR (FY13-17) of 22% in EBITDA and 30% in profitability was higher than peers (Rallis, Dhanuka Agritech, Insecticides), primarily led by scale-up in its CSM business. Also, industry leading execution helped PI maintain healthy return ratios until FY17 (RoE at ~33%). However, declining profitability and asset turns marred return ratios in FY18, with RoE declining to 21% from 33%. Cash conversion cycle deteriorated further to 95 days (FY17: 90 days) due to rising receivable days. This led to subdued earnings to cash flow of 82% (FY17: 81%). Cash & investments remain high at INR3b (16% of NW), with yields at 14% – much higher than borrowing cost of 5% – leading to a positive carry. Thus, other income contribution to PAT stood high at INR0.6b, 16% of PAT (FY17: INR0.4b, 8% of PAT).
Op. performance, albeit waning, among best in industry: Multiple internal/external headwinds hurt both CSM (+1%) and domestic (-2%) businesses in FY18. However, from the last-five-year perspective, the CAGR of 22% in EBITDA and 30% in PAT was significantly higher than its peers. Over the same period, (a) EBITDA margin expanded 360bp to 22% and (b) EBIT growth (at 27%) outpaced capital employed (at 22%) – contrary to peers, where EBIT growth trailed the rise in capital employed.
R&D spend highest among peers: While R&D spend (capital + revenue) declined to INR0.8b (FY17: INR0.9b), revenue R&D spend increased 64% to INR0.7b (18% of PAT) from INR0.4b (9% of PAT) in FY17, indicating a potentially robust new molecule pipeline. Also, R&D spend (~4% of revenue) remains highest among peers (RALI is distant second with R&D at 1% of revenue)
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.
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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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