MOSL: PI INDUSTRIES (Buy)-Broadening its horizon with API acquisition
PI INDUSTRIES: Broadening its horizon with API acquisition
(PI IN, Mkt Cap USD6.8b, CMP INR3319, TP INR3720, 12% Upside, Buy)
Earning below estimates, but strong show on high base
- PI Industries (PI)’s operating performance during the quarter was impacted by one-time expenses pertaining to (i) COVID management, (ii) consulting fees, and (iii) other costs related to various strategic projects. Thus, despite this, the company reported EBITDA growth of 9% on the high base of last year.
- PI acquired the Active Pharma Ingredient (API) business division of lnd Swift Laboratories Limited (ISLL) for INR15.3b, thereby marking its foray into the Pharma segment. The API business of ISLL has a diversified portfolio of 20+ products, with a leadership position (global Top 5) in several of them, and a good R&D product pipeline. The acquisition is the right fit for PI considering the quality of the asset, approvals of the facility, current product portfolio, and pipeline of products. Thus, PI could leverage its knowledge in process chemistry and its operating efficiency to expand into the Pharma space. On an FY21 basis, PI has acquired at EV/EBITDA of 7.6x and PE of 17.8x (v/s 68.3x for PI).
- We increase our earnings estimate for FY23E by 4%, factoring in the acquisition based on the details currently available – which would be revisited once there is more clarity on the same. Maintain Buy, with TP of INR3,720.
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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