PL Stock Report: P.I. Industries (PI IN) - Q1FY24 Result Update - Absolute outperformance..!! - BUY

P.I. Industries (PI IN) - Himanshu Binani - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs3,877 | TP: Rs4,850

Q1FY24 Result Update - Absolute outperformance..!!

Quick Pointers:

♦ CSM/domestic revenue growth of +33%/-13% YoY respectively.

♦ CSM order book at USD1.8bn (+29% YoY and flat QoQ).

PI Industries (PI) 1QFY24 results were better than our and consensus estimates with Revenue/EBITDA/PAT growth of 24%/35%/46% YoY (PLe 17%/21%/22% YoY) led by robust performance in the exports segment. CSM revenues were up 37% YoY to Rs15.6bn (Excl. Pharma revenue of Rs443mn at Rs15.2bn up 33% YoY) (PLe Rs13.93bn) (Volume/Price growth of 29%/4%). Domestic revenues remained subdued and were down 13% YoY to Rs3.47bn (PLe Rs4.1bn), as focus was largely towards efficient WC management than that of volume growth. Gross margin improvement of 270bps YoY to 46.5% was partially offset by higher opex & one-off expense pertaining to pharma business restricting EBITDA margin expansion of 210bps YoY to 24.5% YoY (PLe23.2%). CSM order book position stood at USD1.8bn (+29% YoY and flat sequentially). Citing robust demand momentum, PI continues to guide revenue growth of 18-20% YoY along with consistent margin improvement primarily driven by strong enquiries in CSM business and new launches in domestic segment. The twin pharma acquisition announced recently (in April’23) is also anticipated to support overall growth (target revenue of Rs5bn in FY24E). We increase our EPS estimates for FY24/25E by 6% each factoring in robust performance in 1Q’24 and expect Revenue/PAT CAGR of 21%/23% (FY11-23, 20%/28%) over FY23-25E. Maintain ‘BUY’ with revised TP of Rs4,850 (earlier Rs4,560) based on 40xFY25 EPS.

Demand traction in exports drives overall performance: Consolidated revenues were up 24% YoY to Rs19.1bn (PLe Rs18.1bn) led by +33%/-13% YoY growth in CSM/domestic revenues. Exports revenues were up 37% YoY to Rs15.6bn (Excl. Pharma revenue of Rs443mn at Rs15.2bn up 33% YoY) (PLe Rs13.93bn). Domestic revenues remained subdued and were down 13% YoY to Rs3.47bn (PLe Rs4.1bn). Favorable product mix coupled with contribution of Pharma business (GM’s of 75%) have resulted into gross margin expansion of 270bps YoY to 46.5%; while higher opex led by increased volumes in CSM and overheads & One-off related to pharma business has restricted EBITDA margin expansion of 210bps YoY at 24.5%.PAT increased by 46% YoY to Rs3.8bn (PLe Rs3.2bn).

Focus on operational excellence to unlock value and efficiencies: PI has identified capacity enhancement for 13 molecules in CSM business (overall capacity enhancement of ~10% YoY). Further, 16 products have achieved highest monthly production in 1QFY24.

Remains confident of achieving 18-20% revenue growth: PI maintained its guidance to achieve revenue growth of 18-20% for next few years with improvement in margins led by better operating leverage and ramping up of new products.

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