PI Industries. BUY CMP (Rs.) 835 Target (Rs.) 937 Potential Upside 12% For private circulation only. Volume No.. I Issue No. 127.

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1 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17. Volume No.. I Issue No. 127 PI Industries Ltd. June 30 th, 2017 BSE Code: NSE Code: PIIND Reuters Code: PIIL.NS Bloomberg Code: PI:IN Differentiated business model Incorporated in 1947, PI Industries PI Industries has emerged as the leading player in the domestic agri-input industry and is primarily engaged in providing plant protection & speciality plant nutrient products and solutions under its agri-inputs business. The company is also one of India s leading custom synthesis companies engaged in providing contract research and contract manufacturing services to global innovators. Investment Rationale Differentiated business model PI Industries has a unique and differentiated business model given the company s focus on in-licensed and co-marketing of products. Under in-licensing, the company acquires newly launched or patented molecules from global innovators and markets the formulated products in India. It enjoys exclusive marketing rights for these molecules and distributes under its own brand in India. Some of the key brands include Nominee Gold, Osheen, Biovita, etc. Its unique product portfolio is competently supported by its extensive sales and distribution network in India. This gives the company a sustainable competitive edge. Its long-standing relationship and reputation of trust & reliability with global innovators not only enables the company to introduce newer agri-products in the domestic market through in-licensing of molecules but also allow it to co market their early stage lifecycle agri input products in India. New launches to drive growth In a bid to further boost its product portfolio, the company has recently entered into a strategic partnership with Germany based chemicals company BASF to provide a broader portfolio of crop-protection solutions to farmers in India. As per the agreement, PI Industries will exclusively market BASF s innovative fungicide and herbicide focused on rice, fruits & vegetables and maize in India. The company will launch four new products in FY18 through this tie-up. Besides, the company has also formed a joint venture with Mitsui Chemical, Agro, Inc. Japan (MCAG) to provide registration services for MCAG s proprietary agrochemicals in India. This collaboration will help bring innovative solutions in India to enhance farm productivity. Additionally, the company has a tie-up with Sony Corporation of Japan for providing R&D services. The company s joint venture agreement with global innovators will not only enable the company to further boost its product portfolio. Robust order book position lends revenue visibility The company s CSM business model (focuses on patented molecules/tie-ups in the early stages of product life cycles) differentiates the company from its peer. Further, the company intends to launch two to three high potential molecules every year. Given its strong order book position a little over USD1bn with 8-9 molecules coupled with sustained focus towards increasing the product pipeline in R&D for potential commercialization will further in aid in sustaining the growth momentum going ahead. Valuations: With continued traction in comercialisation of molecules and robust ore book position, we expect the growth to remain strong. As a result, we expect consolidated revenue/pat to grow at a CAGR of 12%/6% over FY17-19E. Hence, we recommend BUY rating on the stock with a target price of Rs.937 (based on 25x FY19E EPS), implies a potential upside of 12% over the next 1 year. Market Data Rating BUY CMP (Rs.) 835 Target (Rs.) 937 Potential Upside 12% Duration Long Term Face Value (Rs.) 1 52 week H/L (Rs.) 950/695 Adj. all time High (Rs.) 950 Decline from 52WH (%) 12.1 Rise from 52WL (%) 20.1 Beta 0.7 Mkt. Cap (Rs.Cr) 11,483 Fiscal Year Ended Y/E FY16 FY17 FY18E FY19E Revenue (Rs.Cr) 2,097 2,277 2,518 2,878 Adj. profit (Rs.Cr) Adj. EPS (Rs.) P/E (x) P/BV (x) ROE (%) One year Price Chart 1, PI Industries Source: Company, In-house research Sensex (Rebased) Shareholding Pattern Mar-17 Dec-16 Chg. Promoters FII s (0.3) MFs/Insti Public (0.1) Others (0.1)

2 PI Industries: Business overview Incorporated in 1947, PI Industries has emerged as the leading player in the domestic agriinput industry and is primarily engaged in providing plant protection & speciality plant nutrient products and solutions under its agri-inputs business. The company is also one of India s leading custom synthesis companies engaged in providing contract research and contract manufacturing services to global innovators. The company is a pioneer in the granular formulations in India and has also become the biggest producer of generic molecules like Profenofos, Ethion, Phorate. It has broad based product portfolio spread across herbicides, insecticides, fungicides and specialty chemicals. PI Industries has a strong infrastructure set-up consisting of 3 formulation facilities as well as 8 multi-product plants under its 3 manufacturing locations. PI Industries has formed partnerships with leading companies globally and it provides services spread across the entire agri sciences value chain ranging from R&D, product & application development, registration, manufacturing, marketing & distribution and customer connect initiatives. Besides, the company has 3 subsidiaries, including PI Japan (focuses on marketing activities) and PI Life Science (focused on only custom synthesis services without manufacturing). PI Industries select key brands Source: Company Differentiated business model PI Industries has a unique and differentiated business model given the company s focus on inlicensed and co-marketing of products. Under in-licensing, the company acquires newly launched or patented molecules from global innovators and markets the formulated products in India. It enjoys exclusive marketing rights for these molecules and distributes under its own brand in India. Some of the key brands include Nominee Gold, Osheen, Biovita, etc. Its unique product portfolio is competently supported by its extensive sales and distribution network in India. This gives the company a sustainable competitive edge. Its long-standing relationship and reputation of trust & reliability with global innovators not only enables the company to introduce newer agri-products in the domestic market through in-licensing of molecules but also allow it to co market their early stage lifecycle agri input products in India. Strong R&D capability The company over the years has built strong R&D capability in the field of chemistry. This has helped the company in building partnership with global innovators for in-licensing arrangements of patented/proprietary products. Further its in-depth expertise in process research, process development, and analytical references enables the company to provide integrated solutions to global customers. The company has one R&D unit in Udaipur, Rajasthan. In order to further fortify its research capabilities, the company has completed the first phase of the expansion of the state-of-the-art 60,000 square feet R&D set up at Udaipur in FY16.

3 This new infrastructure supports the increasing R&D projects under various disciplines of chemistry, library synthesis and joint research assignments with global innovator partners. Source: Company CSM business a key differentiator The company forayed into the CSM business in 1990s by setting up a manufacturing plant at Panoli, Gujarat. The company has maintained a long-standing relationship with global product innovators and provides contract research and manufacturing services across global agrochemical, pharmaceutical and technology sectors. PI partners with leading innovators primarily in US, Europe and Japan to manufacture molecules which are patented and are in early stage of their life cycle. It provides end-to-end solutions starting from R&D to manufacturing to commercialisation of molecules in partnership with global multinationals. The CSM business aims to provide end-to-end solutions in specialty and fine chemicals. The company intends to launch two to three high potential molecules every year. The company possesses a strong order book of USD1bn in FY17. We expect the business to sustain its growth momentum going forward given its strong order book coupled with commercialization of new molecules. Foray into Pharma space The company is also expanding aggressively beyond the agrochemicals and is foraying into pharma intermediates space. The company is currently evaluating options of inorganic growth opportunity in this space, however this is still at a nascent stage. We expect the company s focus on expanding its product portfolio and service offering beyond agrochemicals to further strengthen its market position. New launches to drive growth In a bid to further boost its product portfolio, the company has recently entered into a strategic partnership with Germany based chemicals company BASF to provide a broader portfolio of crop-protection solutions to farmers in India. As per the agreement, PI Industries will exclusively market BASF s innovative fungicide and herbicide focused on rice, fruits & vegetables and maize in India. The company will launch four new products in FY18 through this tie-up. Besides, the company has also formed a joint venture with Mitsui Chemical, Agro, Inc. Japan (MCAG) to provide registration services for MCAG s proprietary agrochemicals in India. This collaboration will help bring innovative solutions in India to enhance farm productivity. Additionally, the company has a tie-up with Sony Corporation of Japan for providing R&D services. The company s joint venture agreement with global innovators will not only enable the company to further boost its product portfolio.

4 Overall revenue to grow at 12% CAGR during FY17-19E 4,000 3,000 2,000 1, % 2,878 1,940 2,097 2,277 2, % 8.1% 8.6% 10.6% FY15 FY16 FY17 FY18E FY19E Revenue (Rs crores) Growth % EBITDA to grow at 12% CAGR during FY17-19E 24.3% 24.0% 24.2% 19.2% 20.7% FY15 FY16 FY17 FY18E FY19E EBITDA (Rs crores) EBITDA margin % Return ratios trend 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% FY15 FY16 FY17 FY18E FY19E ROE (%) ROCE (%) Source: Company, In-house research Key Risks: Weak monsoon season could have a bearing of agrochemicals demand. Increasing competition. Decline in prices of agricultural commodities.

5 Profit & Loss Account (Consolidated) Y/E (Rs. Cr) FY16 FY17 FY18E FY19E Total operating Income 2,097 2,277 2,518 2,878 Raw Profit Material & Loss cost Account (Consolidated) 1,159 1,163 1,289 1,474 Employee cost Other operating expenses EBITDA Depreciation EBIT Interest Cost Other income Profit before tax Tax PAT Minority Interest P/L from Associates Adjusted PAT E/o income / (Expense) Reported PAT Balance Sheet (Consolidated) Y/E (Rs. Cr) FY16 FY17 FY18E FY19E Paid up capital Reserves and Surplus 1,158 1,613 1,989 2,425 Net worth 1,172 1,627 2,003 2,439 Minority interest Total Debt Other non-current liabilities Total Liabilities 1,353 1,750 2,043 2,479 Net fixed assets ,061 1,165 Capital WIP Goodwill Investments Net Current Assets ,093 Deferred tax assets (net) Other non-current assets (56) Total Assets 1,353 1,750 2,043 2,479 Cash Flow Statement (Consolidated) Y/E (Rs. Cr) FY16 FY17 FY18E FY19E Pre-tax profit Depreciation Chg in Working Capital (23) (99) (49) (102) Others 25 (81) (40) (44) Tax paid (108) (103) (112) (129) Cash flow from operating activities Capital expenditure (321) (149) (200) (200) Chg in investments - (83) - - Other investing cashflow Cash flow from investing activities (297) (195) (160) (156) Equity raised/(repaid) Debt raised/(repaid) 25 (69) (83) - Dividend paid (60) (66) (73) (80) Other financing activities (12) Cash flow from financing activities (40) (80) (156) (80) Net chg in cash Key Ratios (Consolidated) Y/E FY16 FY17 FY18E FY19E Valuation(x) P/E EV/EBITDA EV/Net Sales P/B Per share data (Rs.) EPS DPS Growth (%) Net Sales EBITDA Net profit Margin (%) EBITDA EBIT NPM Return Ratios (%) RoE RoCE Turnover Ratios (x) Sales/Total Assets Sales/Working Capital

6 Rating Criteria Large Cap. Return Mid/Small Cap. Return Buy More than equal to 10% Buy More than equal to 15% Hold Upside or downside is less than 10% Accumulate* Upside between 10% & 15% Reduce Less than equal to -10% Hold Between 0% & 10% * To satisfy regulatory requirements, we attribute Accumulate as Buy and Reduce as Sell. * PI Industries is a mid-cap company. Disclaimer: Reduce/sell Less than 0% The SEBI registration number is INH The analyst for this report certifies that all the views expressed in this report accurately reflect his / her personal views about the subject company or companies, and its / their securities. No part of his / her compensation was / is / will be, directly / indirectly related to specific recommendations or views expressed in this report. This material is for the personal information of the authorized recipient, and no action is solicited on the basis of this. It is not to be construed as an offer to sell, or the solicitation of an offer to buy any security, in any jurisdiction, where such an offer or solicitation would be illegal. We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable, though its accuracy or completeness cannot be guaranteed. Neither Wealth India Financial Services Pvt. Ltd., nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the investments referred to in this material may go up or down. Past performance is not a guide for future performance. We and our affiliates, officers, directors, and employees worldwide: 1. Do not have any financial interest in the subject company / companies in this report; 2. Do not have any actual / beneficial ownership of one per cent or more in the company / companies mentioned in this document, or in its securities at the end of the month immediately preceding the date of publication of the research report, or the date of public appearance; 3. Do not have any other material conflict of interest at the time of publication of the research report, or at the time of public appearance; 4. Have not received any compensation from the subject company / companies in the past 12 months; 5. Have not managed or co-managed the public offering of securities for the subject company / companies in the past 12 months; 6. Have not received any compensation for investment banking, or merchant banking, or brokerage services from the subject company / companies in the past 12 months; 7. Have not served as an officer, director, or employee of the subject company; 8. Have not been engaged in market making activity for the subject company; This document is not for public distribution. It has been furnished to you solely for your information, and must not be reproduced or redistributed to any other person. Contact Us: Funds India Uttam Building, Third Floor No. 38 & 39 Whites Road Royapettah Chennai T: contact@fundsindia.com

7 Dion s Disclosure and Disclaimer I, Abhijit Kumar Das, employee of Dion Global Solutions Limited (Dion) is engaged in preparation of this report and hereby certify that all the views expressed in this research report (report) reflect my personal views about any or all of the subject issuer or securities. Disclaimer This report has been prepared by Dion and the report & its contents are the exclusive property of the Dion and the client cannot tamper with the report or its contents in any manner and the said report, shall in no case, be further distributed to any third party for commercial use, with or without consideration. Recipient shall not further distribute the report to a third party for a commercial consideration as this report is being furnished to the recipient solely for the purpose of information. Dion has taken steps to ensure that facts in this report are based on reliable information but cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this report. It is hereby confirmed that wherever Dion has employed a rating system in this report, the rating system has been clearly defined including the time horizon and benchmarks on which the rating is based. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this report is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. Dion has not taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. This report is not to be relied upon in substitution for the exercise of independent judgment. Opinions or estimates expressed are current opinions as of the original publication date appearing on this report and the information, including the opinions and estimates contained herein, are subject to change without notice. Dion is under no duty to update this report from time to time. Dion or its associates including employees engaged in preparation of this report and its directors do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of securities, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. The investments or services contained or referred to in this report may not be suitable for all equally and it is recommended that an independent investment advisor be consulted. In addition, nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to individual circumstances or otherwise constitutes a personal recommendation of Dion. REGULATORY DISCLOSURES: Dion is engaged in the business of developing software solutions for the global financial services industry across the entire transaction lifecycle and inter-alia provides research and information services essential for business intelligence to global companies and financial institutions. Dion is listed on BSE Limited (BSE) and is also registered under the SEBI (Research Analyst) Regulations, 2014 (SEBI Regulations) as a Research Analyst vide Registration No. INH Dion s activities were neither suspended nor has it defaulted with requirements under the Listing Agreement and / or SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the BSE in the last five years. Dion has not been debarred from doing business by BSE / SEBI or any other authority. In the context of the SEBI Regulations, we affirm that we are a SEBI registered Research Analyst and in the course of our business, we issue research reports /research analysis etc that are prepared by our Research Analysts. We also affirm and undertake that no disciplinary action has been taken against us or our Analysts in connection with our business activities. In compliance with the above mentioned SEBI Regulations, the following additional disclosures are also provided which may be considered by the reader before making an investment decision:

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