Buy PI Industries; target of Rs 850: Emkay Global Financial

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Emkay Global Financial's report on PI Industries

Industry prospects remain healthy with expectations of a ~9.5% CAGR in value terms over CY19-24E. We expect VBL to grow above the industry levels, with a 10.9%/13.3% CAGR in terms of volume/value (refer to Exhibits 1-4). Under-penetration in acquired territories and scope for distribution expansion in Juices are key drivers for above industry growth. VBL's best-in-class operations and early signs of success provide confidence of market share gains in acquired regions. PepsiCo/other bottlers lost track in these regions due to loss-making operations and presence in other business segments.

Outlook

We assume coverage on VBL with a Buy rating and a TP of Rs850. The positive stance is driven by visible market-share-gain opportunities in a healthy growing industry, best-in-class operational efficiencies and improving RoIC profile. CY20E performance will be hit by Covid-19 but long-term growth confidence drives higher-than-consensus estimates.

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