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Value investor- India mid & small caps

Bhaskar Chakraborty

Equity Bottom-Up

<ul class=""><li>PI is India's only Custom Synthesis (CSM) player (high barrier to entry, high margins, long growth runway) and is growing order book at 6-year Cagr of 26% even as global crop protection market declined over CY14-16</li><li>Exploring Pharma Contract Research And Manufacturing Services (CRAMS) business that could add another leg to growth</li><li>CSM growth will accelerate as global crop protection market resumes growth in CY2018</li><li>&gt; 70% of domestic revenues come from in-licensed high margin molecules</li><li>Manufacturing JVs with BASF and Kumiai Chemical will introduce new products, be margin accretive</li><li>Domestic crop protection growth to accelerate on the back of second consecutive normal monsoon in FY18 and sharp hike in MSP of key crops in run up to central election in CY2019.</li><li>Net cash balance sheet, attractive return ratios and large underutilized capacity are additional sweeteners</li><li>Stock has underperformed Nifty and trades at 20% discount to peers who have weaker growth and margin profiles. Our target price at 25x FY19 Bloomberg consensus estimate is Rs1025. BUY for 30% upside.</li></ul>

PI is India's only Custom Synthesis (CSM) player (high barrier to entry, high margins, long growth runway) and is growing order book at 6-year Cagr of 26% even as global crop protection market declined over CY14-16Exploring Pharma Contract Research And Manufacturing Services (CRAMS) business that could add another leg to growthCSM growth will accelerate as global crop protection market resumes growth in CY2018&gt; 70% of domestic revenues come from in-licensed high margin moleculesManufacturing JVs with BASF and Kumiai Chemical will introduce new products, be margin accretiveDomestic crop protection growth to accelerate on the back of second consecutive normal monsoon in FY18 and sharp hike in MSP of key crops in run up to central election in CY2019.Net cash balance sheet, attractive return ratios and large underutilized capacity are additional sweetenersStock has underperformed Nifty and trades at 20% discount to peers who have weaker growth and margin profiles. Our target price at 25x FY19 Bloomberg consensus estimate is Rs1025. BUY for 30% upside.

PI Industries: Strong Moat, Buy for 30% Upside

Pi Industries

PI Industries: Strong Moat, Buy for 30% Upside