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PI Industries stock price rises 5% after Plant Health Care acquisition. Should you buy the stock?

PI Industries stock price rises 5% after Plant Health Care acquisition. Should you buy the stock?
PI Industries stock price rises 5% after Plant Health Care acquisition. Should you buy the stock?

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

The acquisition will be made through a wholly owned international subsidiary of PI Industries for a price of approximately £32.8 million, to be paid in cash and funded from proceeds from previous Qualified Institutional Placements (QIP).

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The acquisition by PHC is in line with PI’s long-term strategic goal of building a differentiated portfolio of integrated solutions for sustainable agriculture. With PHC, PI gains access to cutting-edge biological/peptide technology platforms in the field of “plant immunity inducers,” the company said in a press release.

PI already has a portfolio of 8 products and many more are in the development and registration pipeline. Sales of biological products increased by ~29% in fiscal year 2024, it said.

“The acquisition of Plant Health Care is a strategic step to expand our portfolio in the agritechnology sector. We are confident that synergies between our companies will create long-term value and accelerate growth,” said Rajnish Sarna, Joint Managing Director of PI Industries Ltd.

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Analysts expect this acquisition to strengthen PI’s biopharma portfolio. Although the acquisition is still in a relatively early stage, it is likely to have a negative impact on earnings per share due to losses.

PHC reported revenue of $11.2 million in 2023 and $11.8 million in 2022. The company reported gross margins of ~60% in recent years. Due to higher R&D, sales/marketing and administration expenses, the company reported a loss of $4 million in 2023 and $9.5 million in 2022.

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“The technology-based acquisition is expected to strengthen PI’s biopharma portfolio. In FY2024, biopharmaceuticals contributed about 12% to domestic agricultural brands’ revenue, and sales increased by about 29% year-on-year. With the new technology-based products, PI can further strengthen its domestic biopharma portfolio. We are waiting for more clarity on PI’s strategy to expand the acquisition. Therefore, we have left our estimates unchanged,” Centrum Broking said.

PI Industries stock is currently trading at 23.9x/20.4x FY25E/FY26E EV/EBITDA. The brokerage maintained a Buy rating on PI Industries shares, with a SOTP-based price target of 4,190 per share.

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According to Jefferies, the acquisition of PHC is attractive due to the new product dynamics and would provide PI Industries with an annual revenue potential of $75 million. In addition, the likely relocation of production to India could move the business towards profitability.

Jefferies recommends “Buy” and the price target for PI Industries stock is 4,750 each.

PI Industries’ share price has risen over 6% in one month and more than 9% since the beginning of the year.

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

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Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage firms and not of Mint. We advise investors to seek advice from certified professionals before making any investment decision.

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