Buy PI Industries - Microsec

We rate PI Industries Ltd. a BUY. Our rating underpins the company's robust business model complimented with strong marketing network and other organic factors. PI Industries Ltd. was incorporated in 1947 in Rajasthan specializes in providing solutions for plant protection and nutrient and Custom synthesis & Manufacturing (CSM) for contract research and production of agro chemicals.

Robust Business

Agriculture dominates the Indian economy (as~66percent of the country's directly dependent on agriculture) and PI industries is the pioneer in this space with an operational experience of over 5 decades in providing solutions through producing and marketing of various agrochemicals for the nourishment and protection of Indian agriculture sector.

Strong Marketing Network

PI industries has one of the oldest and vigorous marketing network spread all across India enables them to penetrate into more zones ensuing sustainable business growth. The company possess an efficient marketing network in the way of segregating the country into 7 zones, 26 regions and 140 territories to reach to all the clutters of beneficiaries. The marketing team has tied up with distribution channels consists of ~8000 distributors and direct dealers and more than 35000 retail points across the major agriculture areas in India.

Acquire and Retain Talent

Skilled manpower is a very important resource and enabler for the company to achieve its growth plans and maintain its competitiveness. Insufficient numbers of qualified and experienced personnel adversely impacted its operating results and financial. The company continues to hire new, highly-skilled scientific and technical personnel, to execute its growth and diversification plans. It also introduced a Rewards and Recognition policy for effective employee engagement and incentivization. The ESOP scheme is one such important step in this direction. The company also continues to focus on regular training programmes and providing opportunities for professional growth to retain and attract talent.

Custom Synthesis Manufacturing

PI Industries Ltd. is one of the leading players in Contract Research (CR) and Contract Manufacturing (CM) services in India. The strength of this business has been developed through years of experience in this business and the in depth of understanding of customer requirements. All this is backed by defined business processes, state of the art R&D centre, kilo lab, pilot plant and manufacturing & analytical facilities, excellent and well experienced stable and dedicated team. Moreover the company reported a staggering 62%YoY growth in this segment in FY2011-12.

Valuation

At the CMP of INR520.70, the stock is trading at 11.75x its FY13E EPS of INR44.33. The stock discounts in terms of historical 5yr average PE to its peers hence making the scrip an attractive buy.

Key Concern

- Uneven and Poor monsoons are one of the major headwinds for the company.

- Stringent revision in the existing government norms regarding agro-based products may dent the company's profitability margins.

Source : Equity Bulls

Keywords