Re: P.I. Industries (1100 cr. Order-Book + Unique Bus.Model)- Concall Key Takeaways-
Dear Maheshiji,
I fully appreciate your efforts in analyzing the company and its business segment.
Recently I have spoken to the management and following are my doubts if you can clarify.
- They don't disclose brand wise sales or major brands and still claims them in top 5 in the industry. But this is a industry where we can not get the authenticate data from reliable source and so we have to rely on different companies. So how is it?
- In custom synthesis who are there largest customers and normally how much order book is constituted by top 5 customers.
- What can be potential of Sony R&D partnership? Currently company is not sharing anything and may be we can expect something by FY15 onwards.
- What is your expectant valuation? Divis get anything above 25 p/e while Rallis or Bayer will get around 16-18 ka p/e. In best case scenario what kind of valuation you see considering 25-30% growth in coming 2-3 years.
- Some where I read revenue contribution from new plant will be around 700-750 crs, but mgt indicates it anywhere between 250-300 crs of turnover. so in best case the asset turnover shold be in the range of 2x capex. correct me if i am wrong.
Waiting for your reply.
Thanks and regards,
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Apologise for delay in reply as was away from the desk....Please find my replies in bold
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[*]They don't disclose brand wise sales or major brands and still claims them in top 5 in the industry. But this is a industry where we can not get the authenticate data from reliable source and so we have to rely on different companies. So how is it?
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PI Ind. has many common clients in CSM and Agri space which is one of the reason why its so closed in sharing sales data.....Second reason being its products being patented molecules and it wants to extract entire juice out of it because of first-mover advantage........I think they should start sharing the data within few years once they achieve a critical scale..
As far as their Agri segment positioning in top 5 in India... thats undisputed fact which can be easily derived from the revenue figures of listed Agrichemical cos. of India.
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[*]In custom synthesis who are there largest customers and normally how much order book is constituted by top 5 customers.
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Who are the largest customers that detail is again not disclosed but almost all major MNC innovator agrichemical cos. of the world are PI's clients..... Top 5 customers contribute ~80 % to CSM order book.
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[*]What can be potential of Sony R&D partnership? Currently company is not sharing anything and may be we can expect something by FY15 onwards.
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The potential could be good...... and I say good instead of huge because patent of the produce of the relationship is going to be owned by Sony........hence, once something is innovated out of this, PI will be a natural CSM partner for that produce being involved since inception.
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[*]What is your expectant valuation? Divis get anything above 25 p/e while Rallis or Bayer will get around 16-18 ka p/e. In best case scenario what kind of valuation you see considering 25-30% growth in coming 2-3 years.
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Here, first we need to see how agri segment fares in near future as there are many headwinds in that space right now......CSM segment plant has got delayed thats a bad news which means that the real contribution from the new plant will come from only FY14 onwards. If Q4FY12 is also as muted as Q2 & Q3 then the valuations PI is commanding right now are one of the highest valuations commanded by it in its history...... Hence, lets wait for Q4FY12 performance and then decide what valuation PI deserves.... Its historical trading range over last many years has been 12x forward and 15x TTM earnings and for it to change both the operational segments of the company need to perform exceedingly well.
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[*]Some where I read revenue contribution from new plant will be around 700-750 crs, but mgt indicates it anywhere between 250-300 crs of turnover. so in best case the asset turnover shold be in the range of 2x capex. correct me if i am wrong.
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700-750 cr. revenue is from both, old and new capacities combine.... From new plant maximum revenue they can generate should be 350-400 cr.
