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Growth momentum to continue

Better product mix driving EBITDA

PI Industries (PI IN) reported healthy Q3, driven by robust exports growth, better product mix and operating leverage benefit. Topline grew 18% to INR 19bn, in line with our estimates. Gross and EBITDA margin expanded 640bps and 344bps respectively, positively impacted by a one-off item related to recovery of theft material, leading to benefit of INR 700mn. Excluding one-off, EBITDA growth was in line.

Pyroxasulfone – Concerns addressed

On Pyroxasulfone, the management clarified that: (a) while the product may be going off-patent in a few geographies but in most developed geographies, the product is being sold as a combination formulation product, which has significantly longer patent life. Combination formulation products are not significantly impacted by the key molecule going generic. (b) When the product goes generic, then the market expands multi-fold. Pyroxasulfone is expected to be a multi-billion dollar market, while the current size is only USD 600-700mn. Hence, PI has huge market available to expand in.

Agrochemical exports up 13%

Total agrochemical business grew 10% to INR 18bn, of which custom synthesis manufacturing (CSM) business grew 13% YoY, while domestic agrochemical business declined 6% YoY. Exports grew on the back of better volumes and ramp-up of recently commercialised molecules. Pharma business clocked revenue of INR 1.3bn. Excluding one-offs, agrochemical EBIT margin expanded 650bps to 27.9%. Pharma business is currently operating at a loss of INR 183mn at the EBIT level.

Valuation: Reiterate Buy with a TP of INR 4,270

Expect continued growth momentum on: 1) healthy orderbook, 2) aggressive capacity expansion plan, 3) sustained R&D investment to prop up tech capability and leverage new opportunities and 4) business scale-up in two recently acquired entities. We introduce FY26E estimates and trim FY24E/25E EBITDA 6%/7% on slower-than-expected ramp-up in pharma business. We roll forward valuation to September 2025E. Maintain Buy with a TP of INR 4,270 (unchanged), on 30x September25E EPS of INR 144.

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