q4fy13update_piind
TRANSCRIPT
7/28/2019 Q4FY13Update_PIIND
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Key Takeaways from PI Industries concal held today :
(1) For Q4FY13, Agri-Input revenues stood at 105 cr. a flat YoY performance. For FY13, Agri-Input
revenues stood at 553 cr., a YoY growth of 9.95 %.
(2) For Q4FY13, CSM revenues stood at 225 cr. a YoY growth of 65.4 %. For FY13, CSM revenues
stood at 595 cr., a YoY growth of 59.09 %.
(3) Jambusar facility contributed only 15 cr. to Q4FY13 revenues and is expected to contribute
~100 cr. in revenues in FY14.
(4) Company has guided for a 25 % YoY growth for its CSM segment and 20 % YoY growth for Agri-
Input segment for FY14.
(5) Management has the visibility of atleast 25-30 % yearly growth in CSM segment for the next 3 years
based on only the current order book.
(6) EBITDA margins for Q4FY13 took a hit of ~265 basis points because of 'starting-up' expenses of
Jambusar facility which commenced commercial production in January'2013. These expenses are
projected to rationalise in FY14 with rising contribution from Jambusar facility to company's total
revenues.
(7) For FY14, management is confident of a 100-125 basis points improvement in consolidated
EBITDA margins.
(8) CSM Order-book at the end of FY13 is at USD 305 mn.
(9) Company is planning to implement the second phase at Jambusar facility by December'2013 for
which negotiations with a global innovator are at an advanced stage.
(10) Company is planning a CAPEX of 100 cr. in FY14 which will be met completely by internal
accruals. This CAPEX includes CAPEX towards second phase at Jambusar facility.
(11) Company retired ~30-35 cr. high cost debt in Q4FY13 out of the proceeds received from 117 cr. QIP
issue raised during February'2013.
(12) Inlicensed products contributed ~50 % to the domestic Agri-Input revenues in FY13 up from 40 % in
FY12.
(13) Company is planning to launch one novel insecticide and one broad-spectrum fungicide in
domestic Agri-Input space during 2HFY14.
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View post Concall :
Jambusar facility, which turned out only half of the anticipated revenues, was the main culprit of lower
EBITDA margins during Q4FY13. The second reason was ~300-350 basis points overall degrowth in yearly margins
in domestic Agri-Input space during FY13 (our ground checks had already indicated this fact) because of bad
monsoons. Both these factors should recede to a great extent in FY14 as ~100 cr. revenue (lower than our
anticipated 120 cr.) from Jambusar facility should take care of the associated costs as well as a likely bettermonsoon this year should bring back the margins in domestic Agri-Input space.
Even with such dismal turnout from Jambusar facility, to our surprise, CSM segment recorded robust
growth of ~65 % on YoY basis in Q4FY13 which is very comforting and signifies that committed deliveries that
were likely to be deilivered from Jambusar facility are delivered intime from Panoli plant which augurs well for
the future of CSM segment. Once Jambusar facility stabilises by Q2FY14, this should mean a consistent higher
quarterly run-rate from CSM segment for PI.
For the first time since inception, CSM segment revenues surpassed Agri-Input segment (595 cr. from
CSM v/s 553 cr. from Agri-Input). This is a very healthy sign as barring temporary hiccups like Jambusar-commercialisation costs, margin scenario for CSM should be robust starting 2HFY14 as delivery assignments are
all patented molecules. Hence, management's projection of 100-125 basis points improvement in consolidated
(blended) EBITDA margins in FY14 is prudent and on a conservative side.
Provided the monsoons turn out good, management has projected a 20 % growth in domestic Agri-Input
space during FY14. We feel its better to be conservative and assume an easily reachable 12-15 % growth in Agri-
Input segment with slightly better margins as margins are unlikely to scale-up fast because of losses suffered by
farmers last year.
Hence, on a consolidated basis, we expect PI Ind. to end FY14 with CSM revenues at 750 cr. and Agri-
Input revenues at 630 cr. translating to a consolidated revenue figure of 1380 cr.. We expect PI's consolidated
FY14 EBITDA margins at minimum 16.8 % which translates to EBITDA of 232 cr.. After adjusting for higher
depreciation costs because of new Jambusar facility and stable finance costs with 30 % Tax Rate, PAT for FY14
should stand at minimum 129 cr. which translates into an EPS of 9.51.
If we extrapolate further onto FY15, then, PI's CSM revenues should stand at minimum 960 cr. (assuming
nil revenues from second phase of Jambusar facility which is likely to be commissioned by 1HFY15) while PI's
Agri-Input revenues should stand at minimum 710 cr. (assuming most conservative 10-12 % growth even for
FY15). Hence, consolidated revenues for PI in FY15 should come at minimum 1670 cr. with atleast 17.5 % EBITDA
margins meaning an EBITDA of 292 cr.. After adjusting for depreciation, finance costs and assuming flat 30 % TaxRate (without incorporating much benefit of Tax Holiday of Jambusar facility), PAT for FY15 should come at 170
cr. translating into an EPS of 12.55 as there is not likely to be any equity dilution till FY15.
FY14e FY15e
Revenue
Agri-Inputs
CSM
1380
630
750
1670
710
960
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EBITDA 232 292
PAT 129 170
EPS 9.51 12.55
Now comes the crucial aspect – the Valuations – at which PI Ind. is trading at present which could
determine whether its prudent to Hold on to our holdings, Add on to our Holdings or Exit from our Holdings
in PI at current market price (CMP). CMP assumed here is INR 125 and based on it the crucial valuation
parameters are provided below :
FY14e FY15e
Price-to-Earning(P/E)
13.14 9.96
EV/Sales 1.35 1.11
EV/EBITDA 8.03 6.38
Mcap/Sales 1.22 1.01
At a price of 125 a share, PI Ind. is trading at one of historically lowest traded multiples. Hence, Exit is
completely out of question. Now, comes the second possibility of Hold – a definite Yes as a shareholder of PI
having invested in the company from a long term point of view current rate is not atall a right price to Sell the
current holding when the company is on verge of entering into its significant phase of growth. Lastly, the
possibility of Add on to the current holding at CMP – a Safe strategy on SIP basis as the company is likely to moveon to higher and higher trading range after passing of each quarterly results.
Although we always respect the markets and feel market forces are wisest to assign right valuations to
any stock at any particular point of time -- but -- aberrations happen in case of thinly traded shares and that is
what is happening to PI Ind. at present. Because of lower than anticipated one quarter margin performance and
significant rise in relative free (public) float because of split in face value from INR 5 to INR 1, the share price is
facing undue pressure which has made the current valuations an attractive investment proposition. Once the
current selling lot is absorbed, PI should soon stabilise in a trading range of 132-140 before declaration of
Q1FY14 results post which new trading range can be arrived at.