BackPI Industries backs-up its hefty valuations with strong growth momentum
Revenue and operating profit grew 41%-55% from the year ago quarter. Domestic revenue grew by an impressive 76%The management aims to improve margins and return profile with ₹2,000 crore raised through a QIP
PremiumMUMBAI: Agrochemicals and custom synthesis products maker PI Industries Ltd impressed the Street with strong performance for the June quarter. The stock gained 6% in Thursday trade hitting a new 52-week high.
Revenue and operating profit grew 41%-55% from the year ago quarter. Domestic revenue grew by an impressive 76% as the company benefited from recovery in demand and amalgamation of products it acquired from Isagro Asia. The (June) quarter saw the highest ever placement of its herbicide product Nominee Gold.
Thanks to proactive raw material and inventory management, exports grew by a decent 23%. Exports largely constitute custom manufacturing products. Revenue from this segment (exports) would have been better if not for the covid-19 disruption to the manufacturing in April.
Nevertheless the business is recovering from the covid-19 disruption. Capacity utilization levels of the manufacturing plants are back to pre-covid levels. Both domestic and export supplies have picked up pace.
With crop sowing progressing well and key products seeing good traction, the management expects revenues in the domestic business to rise 20% in current fiscal. It expects to clock similar growth in exports, helped by greater product off-take in custom manufacturing business. “Have very clear visibility on off-take and supplies to customers," the management told analysts.
Revenues last fiscal grew 19%.
The continuation of revenue growth momentum will help support the stock, whose valuations at 34 times FY22 earnings per share estimates are not cheap.
The mainstay custom manufacturing business has an order book of around $1.5 billion providing growth visibility of next couple of years. Apart from this, the company is seeing good enquiries from customers for new business tie-ups, driven by realignment in global supply chains.
The company is seeing ‘multiple’ business opportunities and raised ₹2,000 crore through qualified institutional placement (QIP) of shares. The management aims to deploy funds in 5-6 quarters. Apart from adding new growth avenues, the management aims to improve margins and return profile (return on investment) through the investment of QIP proceeds.
While progress on the new investment plan will be tracked, meanwhile investors would do well to track margin trajectory.
Gross margins in the June quarter softened 220 basis points reflecting adverse product mix and inferior profit margins of the recently amalgamated Isagro business. While the management expects better business volumes and operating leverage to make-up for the softness in gross margins in the near term, the profit margin trajectory remains important. En
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