PI Industries Stock Analysis

4 min read
In this article, we are going to do PI Industries stock analysis, in which we will discuss company overview, key financials and valuation aspect.

Detailed Stock Analysis of PI Industries Ltd

Introduction

In this article, we are going to do PI Industries stock analysis, in which we will discuss company overview, key financials and valuation aspect.

Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

PI Industries Stock Analysis

Company Overview

  • The company was founded and incorporated by the name of Mewar Oil & General Mills Ltd in 1947 in Udaipur, Rajasthan (India). It was named PI Industries Ltd in 1993 to reflect its new diversified businesses.
  • PI Industries Ltd is engaged in the business of Agri-inputs, Fine chemicals and CRAMS (Contract Research and Manufacturing Services), Polymers and Engineering Services.
  • Thus, Services offered by the company include :
    1. Contract Research & Manufacturing Services in the areas of Fine Chemicals, Agro Chemicals and Pharma intermediates.
      • It is India’s largest CRAMS company with over 95% of revenue from Patented Products.
    2. Crop protection, Specialty products, Plant nutrients and Seeds : Pesticides, Fungicides, Herbicides etc.
    3. Various grades of engineering plastics and compounds for the end use in Automobiles, Electricals, Home Appliances etc.
  • Today, PI Industries is ranked amongst the top five Indian Agro-chemical manufacturers, marketers and exporters, with leading market share.
  • The company has PAN India presence through a vast distribution network :
    • 30+ Countries
    • 10,000+ Distributors & Dealers
    • 60,000+ Retail Points
  • It has 3 subsidiaries named :
    1. PI Life Sciences Research Ltd
    2. PILL Finance & Investments Ltd
    3. PI Japan & Co. Ltd

Business Model

 PI Industries – Unique Business Model


 PI Industries Stock Analysis – Unique Business Model

Key Financials

Sales & Net Profit Growth
PI Industries Ltd - Sales & Net Profit Growth %
PI Industries Ltd – Sales & Net Profit Growth %
  • On account of Sales and Net Profit‘s historical CAGR growth for TTM (Trailing 12 Months), 3 years and 5 years, we can see that the company has considerably good and consistent growth over last 3 and 5 years.
  • Also, for TTM, the sales of the company has increased significantly by almost 24%. In spite of decline in Domestic operations due to erratic monsoon, PI Industries has delivered the growth of 24% driven by exports.
Valuation
Valuation of PI Industries Ltd
Valuation of PI Industries Ltd
  • The 1 year return of the stock is 76%. The current Price to earnings ratio is 44.61. And the historical average PE ratios for last 3, 5 and 10 years are 29.5, 29 and 20.7 respectively.
  • Thus, the stock is currently trading at a premium valuation as compared with its historical valuation.
  • The rally of 76% in the share price over last 1 year is mainly on account of :
    • Availability of a lot of opportunities to India in the chemical manufacturing business amidst challenges to China
    • 24% growth in Sales over last 12 months period (TTM) driven by growing export business
    • Consistently improving Operating profit margin %
    • New Product launches and enhancement in capacity

Shareholding Pattern as on Sept-2019

PI Industries Ltd - Shareholding Pattern as on September 2019
PI Industries Ltd – Shareholding Pattern as on September 2019
  • Strong promoter holding, about 51.38%, with 0 pledged percentage is a very positive sign for the company.
  • Consistent rise in FII’s stake over last 4 quarters. current holding is 14.69%
  • Mutual funds also have a significant stake of 16.83%.
  • Other DIIs and general public hold around 2.99% and 14% respectively.

Exploring Opportunities Amidst Challenges in China

  • Challenges around China has increased the number of inquiries and is expected to have a positive impact on the export business. China’s strict effluent norms and rising wage costs are expected to bring a lot of opportunities to India in the chemical manufacturing business.
  • In this scenario, PI Industries will be able to capitalize on such opportunities arising out of the Chinese market, provided they are able to scale up to meet the growing demand.
  • Capital Expenditure Set to Increase
    • The company incurred capital expenditure of Rs. 347 Cr in H1 FY20 and the management has given a Capital Expenditure guidance of Rs. 450 Cr for FY20.
    • Significant investments in the recent period has led to new product launches and enhancement in capacity.
    • It is expected that the company is going to increase its capital expenditure in the coming years.
  • Earnings Visibility :
    • The company’s top line is expected to grow at a healthy 21% CAGR for FY19-21E driven by the growing export business and new product launches. However, declining domestic revenue amidst slowdown remains a concern for the management.
    • But, EBITDA margin % is improving consistently to almost 21% fuelled by effective measures towards to control cost and other expenses.

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