Sharekhan's research report on PI Industries
Q4FY23 performance was a mixed bag as a 15% y-o-y growth in CSM revenues got offset by muted domestic revenues and 260 bps miss in OPM at 21.9% (flat y-o-y). The consolidated PAT of Rs. 281 crore (up 37.3% y-o-y) was 5% below our estimates of Rs. 294 crore as margin miss got partially offset by higher other income and lower interest cost. CSM business revenue growth of 15% y-o-y to Rs. 1,281 crore was led by a 17% y-o-y growth from price/currency/product mix and was partially offset by a 2% decline in volumes. Muted domestic revenue growth of 1% y-o-y given +2%/-1% volume/pricing. Margins were weak due to miss in gross margins and higher opex (one-time cost of Rs. 20-25 crore for strategic initiatives). Healthy FY24 revenue guidance (excluding pharma) of 18%-20% which would be led by volume growth and expectation of margin improvement (operating leverage benefits and increasing utilisation). PI is not seeing any change in demand for its products as its more toward specialty product while channel inventory is high for generic products.
Outlook
PI’s pharma foray would remove the long pending overhang of QIP cash utilisation and bring the benefit of diversification. Our PAT growth expectation of a 19% CAGR over FY2023-FY2025E would further improve post integration of TRM and Archimica’s acquisition. We maintain a Buy rating on PI Industries with an unchanged PT of Rs. 4,200. The stock trades at 29x its FY25E EPS.
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