PI Industries shares price surged around 3% on Friday to hit an intraday high of Rs 2,967 a piece on BSE. While the stock has tumbled 4 per cent so far this year, JM Financial remains bullish and sees a 21% upside on the stock. “With a runway for growth in its existing molecules and a strong upcoming product pipeline, PI’s CSM revenue is likely to demonstrate 20% CAGR over FY22-25. We maintain BUY with a revised target price of Rs 3,460 as its base agrochemicals business outlook remains robust,” the brokerage firm said in its report. Time period given by the analyst is one year for when PI Industries share price can reach the defined target.
CSM pipeline provides long-term growth visibility
Analysts at JM Financial believe that PI’s CSM molecules pipeline is likely to offer a big market opportunity, on top of its existing portfolio. The chemical company was recently granted registration by CIBRC to manufacture several patented molecules. These two molecules are Fluindapyr and Valifenalate. “This molecule provides PI long-term revenue growth visibility with peak estimated annual sales of $200-250 million (for PI) and patent validity beyond CY28-30,” they said.
Valifenalate, developed by Ishihara, has peak estimated sales of $25mn. “This molecule gives PI a target market opportunity of $12 million. These molecules provide long-term growth visibility on the existing CSM revenue base of around $550 million in FY22,” they further said.
PI well set to demonstrate 20% CAGR in its CSM business
Since PI had started supplying some of its existing CSM molecules very recently; there is also an opportunity for PI to scale up in these molecules, according to JM Financial. Some of these molecules are Chlorantraniliprole with an estimated end-market size $1.7 billion (patent expiry in 2024), and Flubendiamide with an estimated end-market size $507 million , patent expiry in 2024). “Basis our understanding, revenue contribution of each of these two molecules is less than 5% of PI’s CSM revenue. With an opportunity to scale up in existing CSM molecules and strong visibility from the upcoming products, we believe PI is well set to demonstrate 20% CAGR in its CSM business,” JM Financial noted.
PI’s base agrochemicals CSM business outlook robust
Recommend: Buy; Target price Rs 3,460, Upside: 21%
The brokerage lowered its FY23/24 EBITDA, PAT estimates by 4-5% to factor in margin contraction in the medium term on account of continued supply chain disruptions. “We estimate PI’s earnings to post around 22% CAGR over FY22-24E. We maintain BUY with a revised March 2023 TP of Rs 3,460/share (based on 40x Mar’24E EPS).” While the brokerage remains bullish, target price has been cut from Rs 3,620 earlier. “We believe PI’s base agrochemicals CSM business outlook remains robust,” it said. However, global slowdown in agrochemicals; and acquisition of value destructive pharma assets remain key risks to the growth outlook.
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