PI Industries share price jumped over 5% in early trade on Thursday after the company announced the acquisition of UK-listed Plant Health Care Plc (PHC) with subsidiaries in the US, Brazil, Mexico and a few other countries.
The acquisition is proposed to be done through a wholly-owned international subsidiary of PI Industries for a consideration of approximately 32.8 million pounds, to be paid in cash and funded from the earlier Qualified Institutional Placement (QIP) proceeds.
PHC’s acquisition aligns with PI’s long-term strategic objective to build a differentiated portfolio of integrated solutions for sustainable agriculture. With PHC, PI will gain access to cutting-edge biological/peptide technology platforms in the “Plant Immunity Inducers” space, the company said in a release.
PI already has a portfolio of 8 products and many more in the development & registration pipeline. Revenue from biological products increased by ~29% in FY24, it added.
“Acquisition of Plant Health Care is a strategic move to expand our portfolio in the agri-tech sector. We believe synergies between our organisations will unlock long-term value and accelerate growth,” said Rajnish Sarna, Joint Managing Director of PI Industries Ltd.
Analysts believe this acquisition shall strengthen PI’s biologicals portfolio, while still in a relatively nascent stage, the acquisition is expected to be EPS decretive due to losses.
PHC reported revenues of $11.2 million in 2023 and $11.8 million in 2022. The company reported gross margins of ~60% over the past couple of years. Due to higher R&D, sales/marketing, and admin expenses, the company reported loss of $4 million in 2023 and $9.5 million in 2022.
“The technology based acquisition is expected to strengthen PI’s biologicals portfolio. During FY24, biologicals contributed ~12% to domestic agri brand revenues and sales surged ~29% YoY. With the new tech-based products, PI can further strengthen its domestic biologicals portfolio. We shall await more clarity on PI’s strategy to scale up the acquisition. Hence, we have kept our estimates unchanged,” Centrum Broking said.
PI Industries stock is currently trading at 23.9x/20.4x FY25E/FY26E EV/EBITDA. The brokerage firm maintained a ‘Buy’ rating on PI Industries shares with a SOTP based target price of ₹4,190 per share.
According to estimates by Jefferies, the acquisition of PHC is attractive based on new product traction and it would give an annual revenue potential of $75 million to PI Industries. Moreover, the likely relocation of production to India could move business towards profitability.
Jefferies has a ‘Buy’ call and PI Industries share price target of ₹4,750 apiece.
PI Industries share price has gained over 6% in one month and more than 9% year-to-date (YTD).
At 9:25 am, PI Industries shares were trading 1.89% higher at ₹3,848.65 apiece on the BSE.
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