PI Industries: Reaping gains from sustained growth across businesses

Strong beat in Q3, positive management commentary sees stock gain more than 9 per cent on Wednesday

A strong beat in December quarter (Q3) results, announced on Tuesday evening, boosted investor sentiment towards PI Industries. Its stock jumped 11.5 per cent in intra-day trade before closing nine per cent up on Wednesday. Robust demand, plans to expand operations through acquisitions and new product launches are seen driving growth momentum for the agro-chemicals maker.

The company reported better-than-expected results in Q3 aided by strong growth across its business verticals. 

Revenue rose 37 per cent year-on-year to Rs 1,162 crore, beating consensus estimate of Rs 1,084 crore by a wide margin. This was aided by continued traction in the exports business – accounting for more than two-thirds of its overall revenue, which grew 40 per cent year-on-year on steady in-flow of enquiries from existing as well as new customers in the agro/non-agro chemicals space.

Consequently, revenue during the 9-month ending December 2020 is up 35 per cent year-on-year. Despite challenges on the supply-chain front on account of the Covid-19 pandemic, exports revenue is up close to 30 per cent during the same period. Similarly, consistent demand for its agri inputs in the domestic market led to a 46 per cent rise in revenue during this period.

 

On the back of this, the company expects to end 2020-21 with a growth of over 20 per cent. Moreover, even on a high base, it remains confident of clocking 20 per cent growth in 2021-22 aided by strategic acquisitions, strong product pipeline and broad-based demand.

“The company is going for the inorganic growth route after raising Rs 2,000 crore via QIP last year. They are evaluating multiple acquisition opportunities in pharma and agrochemicals and that's what is going to drive growth going forward,” said Rohan Gupta, research analyst, Edelweiss Securities. 

PI has 5-6 new molecules in its product pipeline – mainly for exports market – which it plans to commercialise in the next financial year. Moreover, a healthy order book of $1.5 billion provides ample revenue visibility over the next 3 to 4 years as another multi-purpose plant goes on stream by the end of this year. On the domestic front, it expects horticulture, rice and pulses crop to aid growth but remained cautious over the ongoing farmer agitation in parts of northern India.

While majority of analysts maintain their bullish stance on PI, the sharp run up in the share price may cap upside in the near-term. The 12-month consensus target price of Rs 2,272 indicates a return potential of just one per cent over Wednesday’s closing price (Rs 2,251), according to data from Bloomberg. Thus, investors are advised to accumulate the stock on dips.