Q3FY23 Review: PI Industries: Capex slippages lower growth visibility

16 Feb 2023 , 11:33 AM

PI’s revenue growth was tad below expectation, owing to muted performance in domestic business. However, improved product mix, tight cost controls and operating leverage helped PI deliver healthy Ebitda margins for Q3. Capex initiatives have slipped significantly to FY24, due to re-designing of MPPs. Nevertheless, management is confident of achieving 20% growth in CSM on a sustainable basis. While analysts at IIFL Capital Services estimates imply an EPS Cagr of ~14% over FY23-25, valuations are rich amid challenges in domestic market and lower visibility on timely execution of growth capex.

PI’s revised capex guidance now stands at Rs5bn (earlier Rs7bn) for FY23. However, this guidance is optically very high than the capex already incurred during M9FY23 of ~Rs2.6bn. The delay in capex is on account of re-designing of upcoming MPPs. For FY24, capex guidance is set at Rs8-8.5bn. Two MPPs are to be commissioned by H2FY24/FY25. Despite such delays, management remains confident to sustain 20% growth in CSM.

Analysts at IIFL Capital Services cut FY24-25ii Ebitda by 2-3%, to factor challenges in domestic business and also reflect operating margins, as guided by the management (vs FY23ii Ebitda margin of 24.6%). While their estimates imply an EPS Cagr of ~14% over FY23-25, valuations are rich amid challenges in domestic market and delay in capex. Hence, they would await dips for fresh buying.