Monsoon, the key factor for agri-input players like PI Ind., is
forecast to be normal this year... A consecutive normal monsoon year
will significantly boost the financials of the company.
Normal monsoon likely this year
PTI
April 3, 2011: New Delhi, Apr 3 India is likely to experience a
normal monsoon for the second consecutive year, raising hopes for a
good crop for millions of farmers across the country.
"There are no worrying signs as yet," said Mr D Sivananda Pai, chief
forecaster and Director of the National Climate Centre.
The La Nina phenomenon, marked by intense cooling of the equatorial
and east Pacific Ocean, is expected to continue till June, he said.
Such condition is known to benefit the south-west monsoon.
Mr Pai said as per current indicators, scientists do not foresee any
immediate warming of the equatorial Pacific- a phenomenon that could
affect the south-west monsoon.
A normal monsoon is likely to bring cheers to over 235 million farmers
as it will help in sowing of rice, sugarcane, soyabean and corn and
lead to high agricultural output.
Last year, the country saw a normal monsoon with 413 of the 597
meteorological districts receiving normal or above normal rainfall.
Nearly one-third of the 597 districts received deficient rains, while
11 got scanty falls last year.
South Asian Climate Outlook Forum, with representatives from weather
offices of the regional countries, is meeting in Pune later this month
to develop a consensus-based outlook for the ensuing summer monsoon.
The India Meteorological Department (IMD) is expected to come out with
its long term forecast of the summer monsoon rainfall season by the
end of this month.
On Mar 15, 11:20 am, mahesh <equityanalystinves...@gmail.com> wrote:
> Follow Up Queries Raised -
> Hi, Mahesh,
>
> I got it. The goodwill of the global innovator cos is the greatest
> asset in this model.
>
> The growth in CSM revenues ofPIwas so sudden that it looks like
> outsourcing possibilities suddenly dawned upon the global cos
>
> How many global cos have a tieup, who are the major ones? How long is
> the relationship with these cos (is it a new & untested relationship
> built only in the last one year?)
>
> Do not know about the manufacturing process much....is the "process
> research" a unique competency (will each molecule have totally
> different and complex process). Can other large chemical/pharma
> manufacturers see the profit in CSM bus and scaleup faster thanPI?
> Who are the current competitors?
>
> Is this potential already priced-in considering the 3 fold jump in
> the
> stock price ofPI?
>
> Thank you again for explaining in detail.
>
> Rgds
> -------------------------------------------------------------------------
> My Reply -
>
> Firstly Thanks for your kind words.
>
> Now, to get back to your points, I think you need to look at the
> history ofPIas also hear the entire concall to understand some
> things which are complex. I will be more than happy to provide you
> the
> entire playback of 74 minutes long concall which was held recently.
> Its in mp3 form and if u want that do mail me I will immediately
> provide it to you. Also, I have with me past 10 ARs ofPIwhich give
> a
> great insight into the road traversed by the company in last many
> years in both agri-input and csm space. I will provide you that also
> as research is a very tough process and we need to dig deeper and
> deeper into a company to arrive at fair and true potential of the
> company.
>
> Now, to reply to your points, i will try to do it as briefly and
> simplistically as possible so that things get crystal clear.
>
> To your first point that "growth in CSM revenues ofPIwas so sudden
> that it looks like outsourcing possibilities suddenly dawned upon the
> global cos" ,
>
> No- it is not sudden. Its the result of last 10 years efforts put-in
> by the company and the relationship built in and credibility
> established. Yes..PIis into csm business since 2000 and I don't
> know
> you are aware or not but the business model whichPIhas adopted of
> focussing on patented products, it takes a great amount of time to
> estblish trust and prove your R&D capability. Once these things are
> done scale-up is very fast as in India there is no company following
> such model of focus on patented products (most are focussing on off-
> patent molecules) and that too in their early lifecycle. Such
> molecules are very critical to the innovator companies and so they
> pick their suppliers very carefully. This is the reason why in early
> part there are just one or maximum two suppliers selected after
> rigorous evaluation as any delay in delivery or flaw can result in
> significant loss of revenues to innovator companies. Hence, it was
> the
> efforts ofPIsince last many years that has resulted in swell in
> order book and it was not atall sudden.
>
> Now, to your second point as to "How many global cos have a tieup,
> who
> are the major ones? How long is the relationship with these cos (is
> it
> a new & untested relationship built only in the last one year?"
>
> I will say here that many of such relationships are kept confidential
> except the ones that we can know of when the company inlicenses their
> molecules for Indian market (as in case of Nominee). Hence, co. has
> not provided no. of companies with which it currently has tie-up and
> their names. However, the relationship in this business are not atall
> untested and short since these are critical relationships which
> affects both parties equally- also, the current order book is the
> result of last many years relationship whichPIhas built with global
> agrichem companies and so the relationships oversighting the order-
> book are of many years.
>
> Now, to your third point as to "Do not know about the manufacturing
> process much....is the "process research" a unique competency (will
> each molecule have totally different and complex process). Can other
> large chemical/pharma manufacturers see the profit in CSM bus and
> scaleup faster thanPI? Who are the current competitors?"
>
> Yes- the process research especially in early lifecycle of a patented
> molecule is a unique competency since in early stage the molecule
> delivery channel is highly volatile and therefore takes a time of 6
> months to stabilise... once stabilisation is done only after that
> delivery can start. Other companies in India normally focus on off-
> patent products. Also, a few who focus on patented products like
> Divis
> has a slight different operating landscape and model thanPI. To add
> further, focus on patented molecules is a time-consuming process and
> the scale-up here is much slower in the initail stage and so
> companies
> in India will not attempt to do so. As far as competition goes, there
> are no domestic competitors forPIand the current order-book is
> established byPIby winning orders against Saltigo, Lonza and DSM -
> all global majors in CSM space.
>
> Now, rgdg. your last point "Is this potential already priced-in
> considering the 3 fold jump in the stock price ofPI?" ..
>
> I will say a clear NO. Such innovative companies always quote at
> premium andPIis a concept stock and so should quote at a
> significant
> premium. If you consider FY11e numbers, thenPI'sagri-input business
> should close in at 400 cr. and csm business at minimum 200 cr. Based
> on FY11e estimatesPIis currently quoting at a p/e of just 11 and a
> mcap-to-sales of just 1. reasonable valuation ofPIshould be
> somewhere at either 15 p/e or a mcap-to-sales of 1.5-2 considering
> its
> underownership, clean management, backing by a strong PE and pending
> order-book giving visibility of future revenues and profts. Once the
> tie-up with Sony materialises in 3-4 years,PIshould quote at a
> valuation of Divis somewhere at 25+ p/e. To just highlight a point,
> to
> inaugurate Sony-PIR&D facility Mr. Osamu Kumagai, Sony's vice-
> president was himself present which givesPIa great recognition.
>
> Lastly, again I will say I will be more than happy to provide you
> playback of entire concall which is a must hear if you want to
> understand the company better.
>
> Rgds.
>
> On Mar 15, 11:19 am, mahesh <equityanalystinves...@gmail.com> wrote:
>
>
>
> > Hi all,
>
> > Some queries and follow-up queries were raised on another forum onPI
> >Industrieswhich makes me to believe that still many are not
> > understanding the business model ofPIproperly. Hence, attaching the
> > queries below as also follow-up queries in my next post alongwith my
> > reply to each of the query for all members reference.. Members are
> > welcome to raise further queries which will help us all collectively
> > understand the company as well as its potential better.
>
> > -----------------------------------------
> > Query-
> > Hi Mahesh,
>
> > Thank you for the detailed report.
>
> > Does the CSM business have enough potential for scaling up if it is
> > only about research? After inventing a molecule in the CSM bus, does
> > the com also involve in manufacturing the product?
>
> > --------------------------------------------
> > My Reply -
>
> > To answer second part of your query first, Yes,PIis involved in
> > maufacturing and it is just that it is involved with the molecules in
> > very early part of its lifecycle. To most of its suppliers it is the
> > only or one of the only two suppliers since 95 % of the csm business
> > comes from patented molecules. Also, to clarify,PIis not directly
> > involved in inventing any molecule in csm business - that part is
> > done
> > by global innovators with whomPIdeals with;PIis rather involved
> > in
> > product process research so as to manufacture the molecule with high
> > yield and scheduled delivery time.
>
> > Rgdg. the scalability aspect of csm business, at presentPIhas an
> > order-book of approx. 1100 cr. to be executed in 2-3.5 yrs... This
> > order book itself is 5 times of FY11e csm revenues of around 200-230
> > cr. Hence, till FY14 atleast a revenue of 300-350 cr. per year can
> > easily be achieved in csm business out of only the present order-book
> > assuming that there will be no fresh inflow of order. The important
> > point to note here is that almost 70 % of the current order book is
> > gained byPIin last 10 months which depicts a healthy trend and
> > promises increase in order-book in months to come. Also, 80 % of the
> > order-book is contributed by Agrochemical sector which leaves ample
> > scope to tap other segments like imaging, electronics and pharma
> > which
> > are fast making their dent in the order-flow. Hence, as far as
> > scalability goes, i don't think its a concen as far asPI'scsm
> > business goes. With the new plat becoming operational by Dec.2011,PI
> > will have a capacity to serve orders worth 700-750 cr. p.a. in FY13
> > and company has adopted a policy in csm business of not expanding w/o
> > tying up offtake..
>
> > I think one needs to understand firstPI'sbusiness model to assess
> > its future potential and for that I am explaining the model in brief
> > for both ofPI'soperating segments below :
>
> >P. I.IndustriesLtd. (BSE – 523642) is a company engaged in two
> > high-
> > potential business segments viz. Agri-Inputs & Custom Synthesis
> > (CSM).
> > It derives its strength from its strong association with leading
> > global innovator companies to whom it offers a unique no-conflict
> > business model with utmost respect to IPs. The success of this
> > business model is evident from the fact that 95 % ofPI'sCSM
> > business
> > comes from patented molecules and that too in early part of their
> > lifecycle. Such early-stage association with global innovator
> > companies makesPItheir partner rather than a supplier which derisks
> > its business to a great extent. Another
>
> ...
>
> read more »- Hide quoted text -
>
> - Show quoted text -
--
**********************************************************************************************
http://www.manjusree.com/
**********************************************************************************************
forecast to be normal this year... A consecutive normal monsoon year
will significantly boost the financials of the company.
Normal monsoon likely this year
PTI
April 3, 2011: New Delhi, Apr 3 India is likely to experience a
normal monsoon for the second consecutive year, raising hopes for a
good crop for millions of farmers across the country.
"There are no worrying signs as yet," said Mr D Sivananda Pai, chief
forecaster and Director of the National Climate Centre.
The La Nina phenomenon, marked by intense cooling of the equatorial
and east Pacific Ocean, is expected to continue till June, he said.
Such condition is known to benefit the south-west monsoon.
Mr Pai said as per current indicators, scientists do not foresee any
immediate warming of the equatorial Pacific- a phenomenon that could
affect the south-west monsoon.
A normal monsoon is likely to bring cheers to over 235 million farmers
as it will help in sowing of rice, sugarcane, soyabean and corn and
lead to high agricultural output.
Last year, the country saw a normal monsoon with 413 of the 597
meteorological districts receiving normal or above normal rainfall.
Nearly one-third of the 597 districts received deficient rains, while
11 got scanty falls last year.
South Asian Climate Outlook Forum, with representatives from weather
offices of the regional countries, is meeting in Pune later this month
to develop a consensus-based outlook for the ensuing summer monsoon.
The India Meteorological Department (IMD) is expected to come out with
its long term forecast of the summer monsoon rainfall season by the
end of this month.
On Mar 15, 11:20 am, mahesh <equityanalystinves...@gmail.com> wrote:
> Follow Up Queries Raised -
> Hi, Mahesh,
>
> I got it. The goodwill of the global innovator cos is the greatest
> asset in this model.
>
> The growth in CSM revenues ofPIwas so sudden that it looks like
> outsourcing possibilities suddenly dawned upon the global cos
>
> How many global cos have a tieup, who are the major ones? How long is
> the relationship with these cos (is it a new & untested relationship
> built only in the last one year?)
>
> Do not know about the manufacturing process much....is the "process
> research" a unique competency (will each molecule have totally
> different and complex process). Can other large chemical/pharma
> manufacturers see the profit in CSM bus and scaleup faster thanPI?
> Who are the current competitors?
>
> Is this potential already priced-in considering the 3 fold jump in
> the
> stock price ofPI?
>
> Thank you again for explaining in detail.
>
> Rgds
> -------------------------------------------------------------------------
> My Reply -
>
> Firstly Thanks for your kind words.
>
> Now, to get back to your points, I think you need to look at the
> history ofPIas also hear the entire concall to understand some
> things which are complex. I will be more than happy to provide you
> the
> entire playback of 74 minutes long concall which was held recently.
> Its in mp3 form and if u want that do mail me I will immediately
> provide it to you. Also, I have with me past 10 ARs ofPIwhich give
> a
> great insight into the road traversed by the company in last many
> years in both agri-input and csm space. I will provide you that also
> as research is a very tough process and we need to dig deeper and
> deeper into a company to arrive at fair and true potential of the
> company.
>
> Now, to reply to your points, i will try to do it as briefly and
> simplistically as possible so that things get crystal clear.
>
> To your first point that "growth in CSM revenues ofPIwas so sudden
> that it looks like outsourcing possibilities suddenly dawned upon the
> global cos" ,
>
> No- it is not sudden. Its the result of last 10 years efforts put-in
> by the company and the relationship built in and credibility
> established. Yes..PIis into csm business since 2000 and I don't
> know
> you are aware or not but the business model whichPIhas adopted of
> focussing on patented products, it takes a great amount of time to
> estblish trust and prove your R&D capability. Once these things are
> done scale-up is very fast as in India there is no company following
> such model of focus on patented products (most are focussing on off-
> patent molecules) and that too in their early lifecycle. Such
> molecules are very critical to the innovator companies and so they
> pick their suppliers very carefully. This is the reason why in early
> part there are just one or maximum two suppliers selected after
> rigorous evaluation as any delay in delivery or flaw can result in
> significant loss of revenues to innovator companies. Hence, it was
> the
> efforts ofPIsince last many years that has resulted in swell in
> order book and it was not atall sudden.
>
> Now, to your second point as to "How many global cos have a tieup,
> who
> are the major ones? How long is the relationship with these cos (is
> it
> a new & untested relationship built only in the last one year?"
>
> I will say here that many of such relationships are kept confidential
> except the ones that we can know of when the company inlicenses their
> molecules for Indian market (as in case of Nominee). Hence, co. has
> not provided no. of companies with which it currently has tie-up and
> their names. However, the relationship in this business are not atall
> untested and short since these are critical relationships which
> affects both parties equally- also, the current order book is the
> result of last many years relationship whichPIhas built with global
> agrichem companies and so the relationships oversighting the order-
> book are of many years.
>
> Now, to your third point as to "Do not know about the manufacturing
> process much....is the "process research" a unique competency (will
> each molecule have totally different and complex process). Can other
> large chemical/pharma manufacturers see the profit in CSM bus and
> scaleup faster thanPI? Who are the current competitors?"
>
> Yes- the process research especially in early lifecycle of a patented
> molecule is a unique competency since in early stage the molecule
> delivery channel is highly volatile and therefore takes a time of 6
> months to stabilise... once stabilisation is done only after that
> delivery can start. Other companies in India normally focus on off-
> patent products. Also, a few who focus on patented products like
> Divis
> has a slight different operating landscape and model thanPI. To add
> further, focus on patented molecules is a time-consuming process and
> the scale-up here is much slower in the initail stage and so
> companies
> in India will not attempt to do so. As far as competition goes, there
> are no domestic competitors forPIand the current order-book is
> established byPIby winning orders against Saltigo, Lonza and DSM -
> all global majors in CSM space.
>
> Now, rgdg. your last point "Is this potential already priced-in
> considering the 3 fold jump in the stock price ofPI?" ..
>
> I will say a clear NO. Such innovative companies always quote at
> premium andPIis a concept stock and so should quote at a
> significant
> premium. If you consider FY11e numbers, thenPI'sagri-input business
> should close in at 400 cr. and csm business at minimum 200 cr. Based
> on FY11e estimatesPIis currently quoting at a p/e of just 11 and a
> mcap-to-sales of just 1. reasonable valuation ofPIshould be
> somewhere at either 15 p/e or a mcap-to-sales of 1.5-2 considering
> its
> underownership, clean management, backing by a strong PE and pending
> order-book giving visibility of future revenues and profts. Once the
> tie-up with Sony materialises in 3-4 years,PIshould quote at a
> valuation of Divis somewhere at 25+ p/e. To just highlight a point,
> to
> inaugurate Sony-PIR&D facility Mr. Osamu Kumagai, Sony's vice-
> president was himself present which givesPIa great recognition.
>
> Lastly, again I will say I will be more than happy to provide you
> playback of entire concall which is a must hear if you want to
> understand the company better.
>
> Rgds.
>
> On Mar 15, 11:19 am, mahesh <equityanalystinves...@gmail.com> wrote:
>
>
>
> > Hi all,
>
> > Some queries and follow-up queries were raised on another forum onPI
> >Industrieswhich makes me to believe that still many are not
> > understanding the business model ofPIproperly. Hence, attaching the
> > queries below as also follow-up queries in my next post alongwith my
> > reply to each of the query for all members reference.. Members are
> > welcome to raise further queries which will help us all collectively
> > understand the company as well as its potential better.
>
> > -----------------------------------------
> > Query-
> > Hi Mahesh,
>
> > Thank you for the detailed report.
>
> > Does the CSM business have enough potential for scaling up if it is
> > only about research? After inventing a molecule in the CSM bus, does
> > the com also involve in manufacturing the product?
>
> > --------------------------------------------
> > My Reply -
>
> > To answer second part of your query first, Yes,PIis involved in
> > maufacturing and it is just that it is involved with the molecules in
> > very early part of its lifecycle. To most of its suppliers it is the
> > only or one of the only two suppliers since 95 % of the csm business
> > comes from patented molecules. Also, to clarify,PIis not directly
> > involved in inventing any molecule in csm business - that part is
> > done
> > by global innovators with whomPIdeals with;PIis rather involved
> > in
> > product process research so as to manufacture the molecule with high
> > yield and scheduled delivery time.
>
> > Rgdg. the scalability aspect of csm business, at presentPIhas an
> > order-book of approx. 1100 cr. to be executed in 2-3.5 yrs... This
> > order book itself is 5 times of FY11e csm revenues of around 200-230
> > cr. Hence, till FY14 atleast a revenue of 300-350 cr. per year can
> > easily be achieved in csm business out of only the present order-book
> > assuming that there will be no fresh inflow of order. The important
> > point to note here is that almost 70 % of the current order book is
> > gained byPIin last 10 months which depicts a healthy trend and
> > promises increase in order-book in months to come. Also, 80 % of the
> > order-book is contributed by Agrochemical sector which leaves ample
> > scope to tap other segments like imaging, electronics and pharma
> > which
> > are fast making their dent in the order-flow. Hence, as far as
> > scalability goes, i don't think its a concen as far asPI'scsm
> > business goes. With the new plat becoming operational by Dec.2011,PI
> > will have a capacity to serve orders worth 700-750 cr. p.a. in FY13
> > and company has adopted a policy in csm business of not expanding w/o
> > tying up offtake..
>
> > I think one needs to understand firstPI'sbusiness model to assess
> > its future potential and for that I am explaining the model in brief
> > for both ofPI'soperating segments below :
>
> >P. I.IndustriesLtd. (BSE – 523642) is a company engaged in two
> > high-
> > potential business segments viz. Agri-Inputs & Custom Synthesis
> > (CSM).
> > It derives its strength from its strong association with leading
> > global innovator companies to whom it offers a unique no-conflict
> > business model with utmost respect to IPs. The success of this
> > business model is evident from the fact that 95 % ofPI'sCSM
> > business
> > comes from patented molecules and that too in early part of their
> > lifecycle. Such early-stage association with global innovator
> > companies makesPItheir partner rather than a supplier which derisks
> > its business to a great extent. Another
>
> ...
>
> read more »- Hide quoted text -
>
> - Show quoted text -
--
**********************************************************************************************
http://www.manjusree.com/
**********************************************************************************************
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