PI Industries - Maintain Buy As 11% Fall Has Priced In Worries: Nirmal Bang

Nirmal Bang Report

Reasons to Buy PI Industries Ltd.

• Visible growth in custom synthesis manufacturing with 18-20% growth guidance aided by $1.8 billion order book.

• compound annual growth rate in FY24-FY26E revenue/earnings per share at 17.5%/15.7% offers future upside once we see improved visibility in pharma ramp-up and higher growth in agrochem CSM and domestic crop protection chemical once the overall market recovers to normal pricing and inventory levels.

• Post-tax return on capital employed also could see upside from our estimate of 16.2%/15.5% once the pharma investment starts generating cash flows at full potential.

• PI trades at September 25E price-to-earning of 26.8 times, which is below its five-year median PE of 35.3 times and 8% below the SD-1 reading on five-year PE.

• Maintain 'Buy' after cutting target price by 8.8% to Rs 3,953 due to 10% cut in target PE to 31 times Sep-25E to build in the concern regarding client concentration risk. We have left our estimates unchanged. The stock’s 11% fall (from Dec 11, 2023 close) has priced in concerns regarding client concentration.

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