PI Industries: Maintain ‘hold’ with a TP of Rs 3,506

2 days ago 13

Meanwhile, ticker retired for execution successful pharma APIs. Retain ‘hold’ with a TP of Rs3,506 (48x Q3FY23E EPS).

On balance, we support ‘hold’ with a TP of Rs 3,506 (48x Q3FY23E EPS).

The mode forward: Inorganic growth: We interacted with PI Industries’ associated managing manager Rajnish Sarna. Key takeaways: i) The Ind Swift (ISL) acquisition has helped PI participate the pharma segment. ii) Potential for doubling ISL gross on with borderline enlargement implicit the adjacent three–four years. iii) While near-term maturation volition beryllium driven by improved utilisation of existing assets (targeting 2–2.3x asset/turn) and introduction/commercialisation of caller products, inorganic maturation is the mode forward. In our view, pursuing ISL’s palmy integration, PI’s premium valuation would sustain. Meanwhile, ticker retired for execution successful pharma APIs. Retain ‘hold’ with a TP of Rs3,506 (48x Q3FY23E EPS).

Top-5 highlights: Is inorganic maturation the mode forward? With 2 palmy acquisitions astatine charismatic valuations nether its belt, absorption is scouting for much specified opportunities successful the home marketplace arsenic good arsenic globally. This, they believe, volition accelerate maturation by reducing regulatory hurdles and agelong gestation play needed to make assets. Can PI prolong near-term maturation with existent assets? Near-term absorption volition beryllium much connected operating leverage and amended utilisation of existing assets by moving up the worth concatenation with a people asset/turnover of 2–2.3x (up from 1.7x successful FY21).

After entering agro and pharma, what’s the adjacent focus? While agro and pharma stay the cardinal maturation drivers, the institution is evaluating opportunities successful technological platforms for scaling up accumulation crossed the specialty chemicals business. PI is besides looking astatine caller organisation avenues successful the CSM space. Is China + 1 benefitting Indian players? Globally, galore players are looking astatine alternatives different than China. In this context, India is the champion alternate fixed different countries person respective limitations. Are authorities policies helping India’s chemic industry? The chemicals manufacture needs greater authorities support. For instance, bringing the manufacture successful the ambit of the PLI scheme/export incentives would beryllium beneficial.

Outlook and valuation: Growth interest addressed; support ‘hold’: PI has been the marketplace person successful agrochemical CSM, and we judge the acquisition of ISL volition assistance it people its beingness successful pharma APIs, enhancing the wide addressable market. As acquisition opportunities stay coagulated successful this space, absorption aims to proceed to accelerate maturation inorganically. The company, we believe, volition proceed to bid a premium valuation led by champion plus allocation and above-industry returns ratios. However, we stay watchful of PI’s introduction into the pharma abstraction and palmy integration of ISL. On balance, we support ‘hold’ with a TP of Rs 3,506 (48x Q3FY23E EPS).

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