PI Industries Q3FY18 Concall Summary

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About the company

  • PI Industries is regarded for its consistency in introducing new research backed products
  •  Cemented various portfolios of advanced products in view of the farmers
  •  Well established relationship with innovators which act as a platform for next phase of growth with partnerships across the value chain
  •  PI industries is at the forefront for being a part and parcel of the overall agchem value chain; Supporting global innovators for commercializing their solutions

Financial Performance

  • Order book stands at close to USD 1.15 billion
  • CAPEX was around Rs.175 crores
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Q3FY18 Performance

  •  Revenue increased by 10.3% to Rs.538 crores (Domestic- Rs.170 crore and export – Rs.368 crore); 3% growth in domestic sales and 14% growth in exports
  •  EBITDA stood at Rs.105 crores with a margin of 19.5%; reduction by 200 bps due to increase in raw materials prices and irregular rainfall
  •  Increase in raw materials and product mix impact has resulted in softer margin
  •  Profit realized was Rs. 81 crores

9MFY18 Performance

  •  Revenue reduced marginally to Rs.1652 crores (Domestic – Rs.682 crore, Export – Rs.970 crore)
  •  Reduction in revenue due to uneven rainfall during kharif, GST changeover and the planned lower export shipment during H1 FY18
  •  EBITDA stood at Rs.358 crores with a margin of 21.6%
  •  PAT slightly reduced to Rs.261 crore YoY due to change in effective tax rate from 14% to 22%

Balance Sheet position

  •  Net Equity to debt stood at 0.03x
  • Cash surplus of Rs. 243 crore

Indian Economy

  • Nation has suffered the effects of below average monsoon for many seasons, leading to reduction in the investment by the farmers on farm and diversify their crop basket
  •  New initiatives in the latest budget announcement to uplift the farmer’s prosperity
  •  MSP to be increased by 1.5 times
  •  Development of rural haat for GrAMs(Gramin Agriculture Markets)
  •  Increase in the support in farm credit
  •  Fasal Bima Yojana and greater allocation on Krishi Sinchai Yojna
  •  Domestically, water availability issue in Tamil Nadu, North Karnataka, Chattisgarh and Coastal Andhra

Export Operations

  •  The supplies are being ramped up as per plan
  •  Commercializing four new products in current FY
  •  Sizable order book and projected improvement indicates growth momentum has revived and is expected to improve

Raw materials

  • Stress in the raw material supplies from China witnessed; impacting supply schedules of exports; this is expected to be short term
  •  Developed alternate raw materials sources in India and other geographies to de-risk the delay in supply due to non-availability of raw materials
  •  This poses an opportunity to backward integrate many products in China
  •  PI is the partner of choice for other companies who are exploring alternate source of raw materials
  • Reduced the dependence on Chinese raw materials from 32-35% to less than 20%; planned to reduce further in next 6-9 months

Expected growth outlook

  • Companies’ portfolio being integrated and re-aligned post mergers and corporate restructuring; expected to open up opportunities
  •  Focus in technology and innovation would help increase the partnerships with global innovators
  •  Growth in the pipeline of high potential novel offerings for launch in India; two products planned to launch next year, one wheat herbicide and one rice insecticide
  •  Cash generated is expected to be strong resulting in healthier balance sheets
  •  Following quarters seem promising as global macro-sentiment is expected to be more supportive

Market Scenario

  • The market condition looks better when compared to last year
  •  Pipeline inventory in different countries have gone down, indicating that the market is reviving to its normalcy