IGI Logo

Although, PI Industries’ (PI’s) headline numbers looked optically strong with Revenues/EBITDA/PAT rising 18%/33%/26% YoY, operating performance was in line due to Rs700mn one-off embedded in GP which further benefited EBITDA. One of the shipments which was lost in Q2FY24 was recovered in Q3FY24 for which the RM cost was booked in Q2 while revenues were booked in Q3. Pharma segment revenues surged 77.2% QoQ at Rs1.3bn with marginal Rs4mn EBITDA vs. loss QoQ. Management cited that the global agrochem environment remained challenging amidst Chinese generics offloading and higher trade inventories hence it guided challenging Q4 impacted by external conditions. Subsequently, the company is likely to attain lower end of its FY24E revenue guidance of 18-20%. It expects 25-26% sustainable EBITDA margins in future. Based on 9M performance, we have lowered our FY24E/FY25E/ FY26E revenue estimates marginally by 0.6%/1.7%/2.6% while upping our EBITDA margins. Based on our revised estimates, we continue to maintain Add with revised TP of Rs3,826 (earlier Rs3,785).

Despite one-off CSM robust CSM margins in Q3

During Q3, PI’s agrochem CSM revenues rose 13.2% YoY at Rs15.0bn vs. Rs13.3bn. Growth was entirely driven by volumes. New molecules commercialised over the past three years grew by 60%+ which provides growth visibility for future. Domestic agrochem revenues declined 6.7% YoY at Rs2.7bn vs 2.8bn impacted by Kharif impact. Overall EBITDA margins improved YoY due to favourable product mix and operating leverage.

Pharma segment reports marginal positive EBITDA

Pharma segment reported strong improvement in QoQ performance with 77.3% QoQ jump in revenues while reporting Rs4mn EBITDA vs loss of Rs183mn in Q2. Considering ~Rs350mn development spend, the proforma EBITDA margins for 9MFY24 stood at ~16%. Management guided pharma margins to scale back to companywide margins after completing the development expenditure which is made to support the business. Development expenditure is expected to continue for a quarter or so.

To attain lower end of 18-20% rev. guidance for FY24E, sust. EBITDA margins at 25-26%

Due to challenging global agrochem environment, management remained skeptical for near term citing to attain lower end of 18-20% revenue guidance for FY24E. However, it remained confident of 25-26% sustainable EBITDA margins. FY25E guidance would be provided post Q4. We believe CSM segment to face near term challenge considering global inventory destocking and Kumiai’s reduced guidance for Pyroxasulfone which is among the key CSM molecules for PI. We have thus lowered our CSM revenue growth estimates while upping the EBITDA margin estimates. The stock is currently trading at 22.1x/ 18.6x FY25E/ FY26E EV/ EBITDA. We maintain Add with a marginally increased TP of Rs3,826 (earlier Rs3,785).

For More Centrum Broking Disclaimer https://www.centrumbroking.com/disclaimer/

SEBI Registration No.:- INZ000205331