Prabhudas Lilladher recommended Hold rating on P.I. Industries with a target price of Rs 1544 in its research report dated June 09, 2020.
Prabhudas Lilladher's research report on P.I. Industries
PI reported subdued results because COVID largely led to higher than anticipated revenue decline (Revenue impact- Rs 1 bn, EBITDA- Rs 220 mn) coupled with lower other income (down 69% YoY). COVID related revenue loss is likely to recoup in Q1FY21. Both domestic and CSM businesses continue to do well with robust demand for key existing molecules (Bispyribac Sodium, Osheen, etc), new launches, entry into pharma value chain, new client additions and ramp up of molecules & facilities commercialization in FY20. Plans to raise capital upto Rs20bn to leapfrog capabilities into newer adjacent verticals & niche technologies (via organic/inorganic route) were impacted by COVID, but it will likely complete soon. The scale of PI's business will increase by +50% (from Balance sheet perspective) and potentially take it to a different trajectory.
Outlook
Given the sizeable nature of potential business expansion, we would wait for further developments to frame our view. We change topline/EBITDA/PAT estimates by 0%/1%/-6% for FY21E and 5%/7%/1% for FY22E. Maintain Hold with revised TP of Rs 1544 (Previous Rs 1430). Investors should add PI on every decline, as rich valuations are unlikely to come down in near future considering high visibility of sustainable growth over the next few years.
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