Target: ₹ 3,420
CMP: ₹ 2,920.8
We believe PI Industries’ CSM molecules pipeline is likely to offer a big market opportunity, on top of its existing portfolio. We understand that PI has recently been granted registration by CIBRC to manufacture several patented molecules.
One of these molecules has been jointly developed by IsAgro and FMC. 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.
One of the other fungicides that PI is likely to manufacture has estimated peak sales of USD 12mn (for PI) and patent validity till CY24. Moreover, PI is yet to ramp up supplies in its recent CSM molecules. Hence, in our view, with a runway for growth in its existing molecules and a strong upcoming product pipeline, PI’s CSM revenue is likely to demonstrate 20 per cent CAGR over FY22E-25.
This also provides a response to major investor concerns around competition coming in several of its key molecules that have already gone off-patent or are likely to go off-patent. Although we agree that pharma acquisition continues to be a key overhang, we maintain Buy with a revised TP of ₹ 3,460 (from ₹ 3,620 earlier) as its base agrochemicals business outlook remains robust.
We have lowered our FY23 / 24 EBITDA / PAT estimates by about 4-5 per cent to factor in margin contraction in the medium term on account of continued supply chain disruptions. We estimate PI’s earnings to post about 22 per cent CAGR over FY22-24.
April 08, 2022