PI Industries Share Price Rises 5% After Acquiring Plant Health Care; Is it worth buying shares?

PI Industries’ share price rose more than 5% in early trading on Thursday after the company announced the acquisition of British-listed Plant Health Care Plc (PHC) with subsidiaries in the US, Brazil, Mexico and several other countries.

The acquisition is proposed to be made through a wholly owned international subsidiary of PI Industries for a consideration of approximately £32.8 million, payable in cash and funded from pre-existing Qualifying Institutional Placement (QIP) proceeds.

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The acquisition of PHC is consistent with PI’s long-term strategic goal of building a diversified portfolio of integrated solutions for sustainable agriculture. Thanks to PHC, PI will gain access to cutting-edge biological/peptide technology platforms in the area of ​​”Plant resistance inducers”, the company said in a press release.

PI already has a portfolio of 8 products and many more in preparation and registration. It added that biologics revenue grew ~29% in FY24.

“The acquisition of Plant Health Care is a strategic move aimed at expanding our portfolio in the agro-technology sector. We believe that the synergy between our organizations will unlock long-term value and accelerate growth,” said Rajnish Sarna, Joint Managing Director, PI Industries Ltd.

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Analysts believe this acquisition will strengthen PI’s biologics portfolio, although it is still at a relatively early stage and the acquisition is expected to have a negative impact on EPS due to losses.

PHC reported revenues of $11.2 million in 2023 and $11.8 million in 2022. Over the past few years, the company has posted gross margins of ~60%. Due to higher R&D, sales/marketing and administrative expenses, the company reported a loss of $4 million in 2023 and $9.5 million in 2022.

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“This technology-driven acquisition is expected to strengthen PI’s bio portfolio. In FY24, bio products contributed ~12% to domestic agri brands’ revenues, with sales growing ~29% YoY. With the new technology-driven products, PI can further strengthen its domestic bio portfolio. We will await more clarity on PI’s strategy to scale up the acquisition. Hence, we have not changed our estimates,” Centrum Broking said.

PI Industries shares are currently trading at 23.9x/20.4x FY25E/26E EV/EBITDA. The brokerage firm has maintained a “Buy” rating on PI Industries shares with a SOTP-based target price of ₹4190 per share.

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According to Jefferies estimates, the PHC acquisition is attractive because of the traction of the new product and would give PI Industries annual revenue potential of $75 million. In addition, the likely shift of production to India could move the business toward profitability.

Jefferies has a call and a price target for PI Industries stock of ₹4,750 per piece.

The PI Industries share price increased by over 6% during the month and by over 9% since the beginning of the year.

At 9:25 a.m., PI Industries shares were 1.89% higher at 1.89%. ₹3,848.65 per piece on BSE.

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