$Com panyname$ Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 2QFY16 Result Review (Wholly owned subsidiary of Bank of Baroda) HOLD PI Industries Ltd. Custom synthesis restricted 2Q revenue growth ; maintain HOLD PI Industries Ltd (PI) reported 2QFY16 result with a consolidated revenue growth of 5%/-20% YoY/QoQ respectively at Rs 4.4 bn led by 10% growth in domestic business and a flat growth in custom Synthesis business (CSM). EBITDA margin seen expansion of ~200 bps YoY to 19% for 2QFY16. CSM business toned down revenue growth for 2QFY16: Total revenue growth was restricted to 5%/-20% YoY/QoQ to Rs 4.4bn mainly due to flat growth in CSM business led by deferred off take schedule of customers (revenue from domestic agri input business grew by 10%; restricted by less than average monsoon). We revise our expectation for FY16 from 20% to 18%. The management expect ~18-20% growth in CSM business and ~15% growth in overall business. EBITDA margins expansion of 200 bps: 2QFY16 EBITDA stood at Rs848mn a YoY/QoQ growth of 17%/-38%. EBITDA margin seen the expansion of 200bps mainly due to better product mix (higher contribution of branded products and moderating input prices). We expect EBITDA margin expansion of 178bps over FY15-18e. Jambusar plant update: 2 nd plant of Jambusar has stared operations and 3 rd plant is expected to start operation from 3QFY16. The company expect, Rs 3-3.5bn revenue contribution from three units of Jambusar plant. The management expect to achieve 2x ATR from Jambusar plant once it is fully operational. Sector: AGRI 29 th October, 2015 Price Price Target Up/Down (%) Rs. 647 Rs. 717 11% Bloomberg Code PI IN Reuters Code PIIL.BO. Share Holding (%) Promoters As on 30th June 2015 58.4 FII 17.0 DIIs 8.79 Stock Data Nifty 8,112 Sensex 26,838 52 week high/low 787/376 Maket Cap (Rs. bn) 88.8 Face Value Rs. 1 Price performance (%) 1M 3M 6M 1Y Absolute 3.0-0.9 3.0 56.7 Relative to Sensex -1.1 1.8 4.4 57.7 Valuation: The stock currently trades at 30.5x/23.8x/18.9x FY16e/FY17e/FY18e EPS. We believe, pressure in domestic agri business and slow off take schedule of CSM customer will put some pressure on the stock for near term. However, with the strong order book and higher contribution from branded products from domestic business will help the company to grow at a CAGR of 20% over FY15-18e. We maintain our HOLD rating with the revised price target of Rs 717. (21x PE on EPS FY18e). Relative Performance 200 150 100 Management Discussion: 1) Order book for 2QFY16 were $610mn, 2) Total revenue to grow at ~15% in FY16, 3) expect to launch 1-2 products in domestic agri input segment and 2 new molecules to commercialised in CSM business, 4) capex to remain Rs 1.75-2bn for FY 16 and ~1.5bn for FY17, 5) capex for FY16 is Rs 3bn 50 BSE Sensex PI Industries Source:-Bloomberg Exhibit 1: Financial summary (Rs mn) Y/E March FY14 FY15 FY16e FY17e FY18e Net sales 15955 19403 22971 27612 33575 Growth (%) 38.6 21.6 18.4 20.2 21.6 Operating margin (%) 18.1 19.3 19.6 20.8 21.1 PAT 1881 2476 2890 3700 4647 Adjusted PAT 2292 2890 3700 4647 27 EPS (Rs) 13.8 16.8 21.2 27.2 34.1 Growth (%) 93.5 21.8 26.1 28.0 25.6 P/E(x) 9.4 38.4 30.5 23.8 18.9 ROE (%) 30.8 28.9 27.9 27.5 27.0 ROCE (%) 23.1 24.8 25.1 25.0 25.4 Debt/equity (x) 0.2 0.1 0.1 0.1 0.0 P/Bv (x) 2.6 9.8 7.5 5.8 4.6 Vaishali Parkar Kumar vaishali.parkar@bobcaps.in +91 22 6138 9382
Exhibit 2: 2QFY16 Financial (Rs Mn) 2QFY16 2QFY15 YoY (%) 1QFY16 QoQ (%) Net Sales 4,461 4,266 4.6 5,548-19.6 Raw Material Cost 2,474 2,443 1.2 3,130-21.0 %of net sales 55.4 57.3 56 Staff Cost 428 319 34.0 402 6.4 %of net sales 9.6 7.5 7 SG&A 712 777-8.4 658 8.2 %of net sales 16.0 18.2 12 EBITDA 848 726 16.7 1,358-37.6 %of net sales 19.0 17.0 24 Depreciation 117 96 21.1 115 1.9 %of net sales 2.6 2.3 2.1 EBIT 731 630 16.1 1,244-41.2 %of net sales 16.4 14.8 22 Interest/(Interest income) 15 19-17.3 27-43.5 Other Income 45 55-19.3 45-0.9 PBT 760 667 14.1 1,261-39.7 Provision for tax -223-228 -429 Recurring PAT 538 439 22.4 832-35.4 Exceptional Items (Loss)/Gain 44 51-12.1 41 8.6 Reported PAT 582 490 18.9 873-33.3 EPS (Rs) 5 4 22.2 7-30.9 Equity research 2
Financials Exhibit 3: Income Statement Net sales 11,514 15,955 19,403 22,971 27,612 33,575 growth (%) 31.0 38.6 21.6 18.4 20.2 21.6 COGS 8,123 11,083 11,154 13,589 16,003 19,358 Staff Cost 886 1,108 1,413 2,136 2,568 3,122 R&D Cost 68 79 194 230 276 336 SG&A Cost 628 795 2,898 2,519 3,028 3,683 EBITDA 1,809 2,890 3,744 4,497 5,736 7,076 growth (%) 22 60 30 20 28 23 Depreciation 220 316 498 596 678 744 EBIT 1,589 2,574 3,246 3,900 5,058 6,332 Other income 82 158 237 248 261 274 Interest paid 214 118 97 135 107 60 Extraordinary/Exceptional items (7) (1) 184 - - - PBT 1,458 2,614 3,386 4,014 5,212 6,546 Tax 485 733 1,094 1,124 1,511 1,898 Minority interest - - - - - - PAT 965 1,881 2,476 2,890 3,700 4,647 Non-recurring items 7 1 (184) - - - Adjusted PAT 972 1,881 2,292 2,890 3,700 4,647 growth (%) 28 93 22 26 28 26 Exhibit 4: Balance Sheet Cash & Bank balances 161 438 341 2,250 3,853 5,918 Other Current assets 5,702 6,931 8,899 8,874 10,532 12,638 Investments 5 5 5 5 5 5 Net fixed assets 5,386 5,691 6,659 7,563 7,884 8,140 Goodwill - - - - - - Other non-current assets 127 162 428 - - - Total assets 11,382 13,227 16,332 18,692 22,275 26,701 Current liabilities 3,206 4,377 6,105 5,087 5,629 6,361 Borrowings 2,297 1,361 815 1,448 1,148 648 Other non-current liabilities 561 545 448 369 369 369 Total liabilities 6,064 6,282 7,367 6,903 7,146 7,377 Share capital 135 136 137 137 137 137 Reserves & surplus 5,182 6,809 8,828 11,652 14,992 19,187 Shareholders' funds 5,317 6,945 8,965 11,789 15,129 19,324 Total liabilities 11,382 13,227 16,332 18,692 22,275 26,701 Equity research 3
Exhibit 5: Cash Flow Statement Profit after tax 965 1,881 2,476 2,944 3,770 4,735 Depreciation 212 165 498 596 678 744 Chg in working capital (272) (63) (534) (723) (1,134) (1,397) Total tax paid 161 (45) (184) - - - Cash flow from operations 1,067 1,937 2,256 2,817 3,314 4,081 Capital expenditure (1,813) (470) (1,465) (1,500) (1,000) (1,000) Change in investments - 0 (0) - - - Cash flow from investments (1,813) (470) (1,465) (1,500) (1,000) (1,000) Free cash flow (747) 1,466 790 1,317 2,314 3,081 Issue of shares 10 1 0 - - - Net inc/dec in debt (276) (937) (546) 633 (300) (500) Dividend (incl. tax) (158) (159) - (287) (367) (461) Other financing activities 1,246 (94) (525) 216 (0) 0 Cash flow from financing 822 (1,190) (1,070) 562 (667) (961) Inc/(Dec) in Cash & Bank 75 277 (280) 1,879 1,647 2,121 bal. Exhibit 6: Ratio analysis Y/E Mar FY13 F14 F15 F16e F17e F18e Per share data (Rs) EPS 7.1 13.8 16.8 21.2 27.2 34.1 CEPS 8.8 16.1 20.5 25.6 32.2 39.6 DPS 1.2 2.3 1.8 2.1 2.6 3.3 BV 38.9 50.9 65.7 86.5 111.0 141.8 Profitability ratios (%) Gross margins 21.8 23.6 35.2 31.5 32.7 33.0 Operating margins 15.7 18.1 19.3 19.6 20.8 21.1 Net margins 8.4 11.8 11.8 12.6 13.4 13.8 Valuation ratios (x) PE 37.7 9.4 38.4 30.5 23.8 18.9 P/BV 6.9 2.6 9.8 7.5 5.8 4.6 EV/EBITDA 5.4 2.1 5.3 4.4 3.5 2.8 EV/Sales 0.8 0.4 1.0 0.9 0.7 0.6 RoE 22.8 30.8 28.9 27.9 27.5 27.0 RoCE 15.5 23.1 24.8 25.1 25.0 25.4 RoIC 13 22 24 27 31 34 Equity research 4
Sales and Dealing Team Purvesh Shelatkar Senior Vice President & Head Equity +91-22-6138 9330 purveshshelatkar@bobcaps.in Anil Pawar Senior Manager Dealing +91-22-6138 9325 anil@bobcaps.in Sachin Sambare Manager Dealing +91-22-61389331/33 sachin.sambare@bobcaps.in Ashwin Patil Executive Dealing +91-22-6138 9326 ashwin@bobcaps.in Research Team Sectors Vaishali Parkar Kumar Analyst Agri, Auto, Defence +91-22-6138 9382 vaishali.parkar@bobcaps.in Padmaja Ambekar Analyst Auto Ancillary, Infra, Midcap +91-22-6138 9381 padmaja.ambekar@bobcaps.in Akanksha Tripathi Analyst Footwear, FMCG +91-22-6138 9383 akanksha.tripathi@bobcaps.in Rishabh Mehta Associate Textile, FMCG, Infra +91-22-6138 9384 rishabh.mehta@bobcaps.in Hareesha Kakkera Associate Bio Technology, Pharmaceuticals +91-22-6138 9351 hareesha@bobcaps.in UTI Tower, 3rd Floor, South Wing, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051. India. 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