Working toward becoming a technology and IP driven organization- PIIND

Update on the Indian Equity Market:

On Tuesday, Nifty closed 1.2% higher at 11,385. Within NIFTY50, GRASIM(+6.5%), ULTRACEMCO (+3.3%), and JSWSTEEL (+3.1%) were the top gainers, while BPCL (-1.2%), TECHM (-0.9%) and CIPLA (-0.8%) were the top losers. Among the sectoral indices, REALTY (+4.0%), PVT BANK (+2.2%), BANK (+2.2%), and MEDIA (+2.2%) gained the most. PHARMA (-0.1%) was the only sector to end with losses.

Working toward becoming a technology and IP driven organization- PIIND

Excerpts of an interview with Mr. Mayank Singhal, MD&CEO, PI Industries (PIIND) published on Economic times website dated 12th August 2020:
• The companyplans to invest the Rs 20,000 mn QIP funds across different categories over the next 2 quarters. One way is into inorganic opportunities to get into complementary adjacencies- including pharmaceuticals. The other way is by acquisition of smaller blocks which could be synergistic and complementary in terms of technology.
• PIIND has 1 or 2 branded products that it plans to launch in the Indian domestic market in FY21. They also plan to commercialize 2 new products for the global contract manufacturing business.
• Over last 5-6 years, PIIND has made aggressive investments in R&D to become a more knowledge-based partner. They are working towardbecoming more of a technology and IP driven organization over next 4-5 years.
• Mr. Singhal expects India to fare well in the global shift in manufacturing. If supported through strong policies in the area of manufacturing chemical industry, India could move to the next level. India should specifically focus towards IP generation and creation which wouldbe an edge over the Chinese competition.
• In India about 50-60% of agriculture is dependent on monsoons. PIIND has 30-40% of its revenue dependent on India. Considering good monsoons currently, PIIND like all India business-based companies will do well.
• PIIND is supplying an intermediate to a Japanese client, for a drug approved for Covid-19 treatment. PIIND is also looking to supply the intermediate to Indian producers entering into the space.
• PIIND plans to grow aggressively in next 3-4 years by utilizing its competency in chemistry and technology. With that into perspective, PIIND has also recently filed 7 patent applications based on process in chemistry capabilities.
Consensus Estimate (Source: marketscreener website)
• The closing price of PIIND was ₹ 1,965/- as of 18-Aug-2020. It traded at 44.6x/ 35.2x/ 28.7x the consensus EPS estimate of ₹ 44.1/ 55.8/ 68.5 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 2,014/- implies a PE multiple of 29.4x on FY23E EPS of ₹ 68.5.

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