PI Industries extends rally, soars 12% in two days on better growth outlook

Shares of PI Industries moved higher by 9 per cent to Rs 3,410.70 on the BSE in Thursday’s intra-day trade amid heavy volumes on better growth outlook. In past two days, the stock of pesticides & agrochemicals company has soared 12 per cent after the company reported December quarter (Q3FY23) earnings. The management is confident of delivering 20 per cent plus revenue growth with continued improvement in margins and returns.

At 11:27 AM; PI Industries quoted 7 per cent higher at Rs 3,340, as compared to 0.56 per cent rise in the S&P BSE Sensex. The average trading volumes at the counter jumped over four-fold today. A combined around 2 million equity shares changed hands on the NSE and BSE.

In Q3FY23, PI Industries’ reported 58 per cent year-on-year (YoY) jump in profit after tax to Rs 351.80 crore. The company’s revenue grew 19 per cent YoY to Rs 1,613 crore. CSM was up 23 per cent YoY to Rs 1,329 crore, led by volume growth of ~9 per cent and ~14 per cent coming from price, currency and favourable product mix. Domestic formulation was up 2 per cent YoY to Rs 285 crore, due to adverse weather condition coupled with higher channel inventory.

Gross margins were up by 73 bps YoY to 47.2 per cent while Ebitda (earnings before interest, taxes, depreciation, and amortization) margin expanded by 387 bps YoY to 25.7 per cent. The company said margin improved on account of favorable product mix and operating leverage.

In Q3FY23 earnings conference call, the management said in the last two to three years, new products contributed almost 17-18 per cent of total revenue. PI expects four to five products to be launched in the coming quarters. For new products to scale up, it generally takes three to four years. The company have robust order book of ~$1.8 billion and significant portion of revenue is from order book.

Analysts at ICICI Securities upgraded their rating on PI Industries from 'HOLD' to 'BUY' on the back of better growth outlook of the CSM business and consistency in performance.

Strong CSM order backlog of ~$1.8 billion bodes well for future growth. Proposed foray into pharma CDMO could expand revenue visibility further and diversify its revenue stream, to a certain extent. Launch of four to five new products every year in both segments and foray in horticulture in domestic segment to aid strong revenue growth are key triggers for future price performance, the brokerage firm said.

PI has levers in place to sustain near-term growth momentum, led by sustained growth momentum in the CSM business, driven by a strong (USD1.8b) order book, the rising pace of commercialization of new molecules, and a sales ramp-up in existing molecules, and product launches in the domestic market (seven new launches in 9MFY23), analysts at Motilal Oswal Financial Services said.