Prabhudas Lilladher's research report on P.I. Industries
PI's results were marginally lower than our estimates due to higher than anticipated tax rate. Both domestic and CSM businesses continue to grow a rapid pace. It has also completed the acquisition of Isagro which will be incorporated in the financials 4Q onwards. PI plans to raise Rs 20 bn within the next 2 months to leapfrog its capabilities into newer adjacent verticals & niche technologies via organic/inorganic route. Our take from concall is that since capital requirement is immediate & sizeable (~52% of FY20E Balance Sheet size) there could be some kind of inorganic growth opportunity that the management may execute soon. The scale of PI's business may increase by +50% from the Balance sheet perspective (FY20E BS size ~Rs 38 bn) and has potential to take it to a different trajectory. Given the sizeable nature of potential business expansion, we would wait for further developments to frame a view on this. In the existing business EBITDA margins are likely to remain flat @ 21.0-21.5% over the next 2 years as Isagro's low margin business profile is likely to offset all the operating leverage benefits for PI. We have revised our topline/EBITDA/PAT estimates by 2%/4%/3% for FY21E and 3%/2%/0.7% for FY22E.
Outlook
We roll forward to FY22E earnings, maintain our HOLD rating and increase target price to Rs 1516 (Previous- 1355) based on 28x FY22 earnings.
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