Sharekhan Suggests Buy This Chemicals Stock For 26% Gains, Dividend Of 300% Announced

Good Q4FY22 Results amid challenging times; revenues/margins meet hopes

PI Industries Limited (PI) reported in-line Q4FY22 results with consolidated revenue/operating profit of Rs. 1,395 crore/Rs. 305 crore, up 16.5%/34.1% y-o-y. The strong growth was led by 47.1%/10.8% y-o-y increase in revenues from domestic/CSM business to Rs. 281 crore/Rs. 1,114 crore reflecting benefit of partial price hikes (average of 7% y-o-y) in both CSM/domestic and higher volumes (especially for domestic business with aggregate volume growth of 9.5%). The robust growth in domestic growth was led by introduction of new products, higher sales of wheat herbicides and good growth for horticulture. OPM improved by 287 bps y-o-y to 21.9% (in line with our estimate of 22%) led by an increase of 196 bps y-o-y in gross margin to 44% given the benefit of partial price hike, operating leverage and better product mix. PAT at Rs. 204 crore (up 13.7% y-o-y) missed our estimates of Rs. 223 crore due to lower other income and a higher tax rate.

The company in the filing informed about the dividend and said declaration of a final dividend of Rs.3/- per equity share i.e. 300% for the financial year ended March 31, 2022, subject to the approval of the Shareholders at the forthcoming Annual General Meeting.

Brokerage Views and Comment on the Valuation, Target Price and Key Risks

Sharekhan has said, "PI's strong balance sheet provides ample scope for organic and inorganic growth over the medium to long term and its earnings growth outlook (expect revenue/EBITDA/PAT CAGR of 19%/26%%/27% over FY2022-FY2024E) remains robust supported by CSM order book of $1.4 billion and ramp-up of 9 new products commercialised in last one year. Hence, we maintain a Buy rating on PI Industries with a revised PT of Rs. 3,300. At CMP, the stock trades at 36.9x its FY2023E EPS and 29.6x its FY2024E EPS."

The brokerage has stated 3 key risks, 1) Delay in commissioning of projects or execution of orders or delayed orders by clients in the export business can affect revenue growth, 2) A higher-than-normal time lag in passing on the increase in raw material prices could affect margins and 3) Delay in the utilisation of QIP funds.

About The Company - PI Industries Ltd.

Founded in 1946, PI Industries Ltd is a leading player in the agro-chemicals space with a market cap of Rs 39.687 Crore. The company has a strong presence in both Domestic and Export markets in the agrochemical space. It has state-of-art facilities in Gujarat having integrated process development teams with in-house engineering capabilities. In India, the company has a strong presence backed by 3000+ people, 28+ stock points, 10000+ channel partners, and 70,000+ retailers. The company has also established their footprints in more than 30 countries supported by 4 global offices.