Multiple long-term triggers for PI Industries
Jun. 26, 2017
Going ahead, new launches and current capex are expected to add to the company's growth. In the company's custom synthesis and manufacturing (CSM) segment, the order book is at a strong $1 billion, comprising 8-9 molecules and has increased from $800 million in Q3FY17. Analysts at Anand Rathi Research believe that growth in the current quarter is expected to be weak given lower global demand. They, however, expect demand to improve in the second half of the current year as crop prices bottom out and inventory shrinks over a period of time. Given its ongoing expansion and thus additional capacity (Rs 200 crore in FY18 including R&D investments), increased revenues from in-licensed products, steady exports and new launches, analysts expect revenue growth over the FY17-19 period to be 15.5%. While operating profits will grow by a similar number, margins are expected to be in the 23.5-24% band.
Gupta of Ambit believes there will be a gradual improvement in CSM revenues in FY18 and a full-blown one in FY19, driven by higher agrochem demand as well as contracts from new molecules. This, coupled with $10-billion worth of molecules turning generic, and the outsourcing opportunity will be another trigger for the company. The brokerage believes that the key strength of the company lies in execution as its operating profits over the past two years have grown by 25% annually despite tough conditions for exports and domestic business.
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