guidance of 20%+ growth in– custom synthesis (60% of overall revenues) and domestic
agri‐inputs 15~20% for FY15/16E. Tweak earnings largely to factor in rise in other income
and lower tax outgo. Earnings are estimated to double over FY14‐17E, an excellent CAGR
of 23.3%. We thus raise our target multiple to 23xFY17E and value PI at Rs 600, +7% upside
from current levels. Considering the limited upside, we downgrade PI to Neutral. PI trades
extremely rich (5.3xFY17E PBR) and ignores macro headwinds such as stress on farm
profits (caused by erratic monsoon and middlemen), regulatory risks and expected
inflation in key competing agri inputs (fertilizers, seeds and farm wages).
Q3 a significant beat: PI’s Q3 earnings were a significant beat led by a revenue surprise in
CSM and Agri‐chemicals. CSM (on deferred revenues from Q2)/Agri‐chemicals grew 44/30%
yoy that helped the overall topline growth of 39% to Rs 5.05 bn. The higher share of CSM
led to about 200 bps contraction in gross margins, however an improved utilization overall
helped the 140 bps yoy expansion in OPM margins to 18.6%. Ebitda grew 51% to Rs 941 mn.
An additional non‐recurring depreciation charge of Rs 9.4 mn and forex gain of Rs 46 mn
have been adjusted to arrive the adj PAT of Rs 597 mn (a growth of 63% yoy). About 47%
jump in other income was partly netted by the higher interest outgo.
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