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Solid Q2 results; Outlook Positive

PI Industries manufactures plant protection and specialty plant nutrient products and solutions under its agri-inputs business. It is also a leading custom synthesis and manufacturing (CSM) company in India, providing contract research and contract manufacturing services to global innovators.

• Standalone revenue increased 8.3% YoY to Rs. 2,131cr in Q2FY25, led by growth in exports. Exports grew 7.8% YoY to Rs. 1,761cr. Agchem exports increased ~10% due to volume growth and ~42% YoY growth in new products.

• Consolidated revenue from Pharma (2.0% of exports) decreased 42.8% YoY to Rs. 41cr owing to high inventory at the innovators. The management expects the revenue to recover in H2FY25 with strong current orders.

• Due to a reduction in supply to institutional customers, domestic revenues decreased 5.0% to Rs. 460cr. Revenue from branded products increased 7% YoY and revenue from biological products rose 18% YoY.

• EBITDA surged 23.7% YoY to Rs. 685cr and margin improved 400bps YoY to 32.1% due to better product mix and operative leverage. Meanwhile, the overhead expenses increased due to the scale-up of exports and promotion expenses related to the launch of new products.

• PAT increased 20.2% YoY to Rs. 558cr, which was partly impacted by an 85.9% YoY increase in tax expenses

Valuation

PI Industries has delivered a robust Q2FY25 performance, defying weak global market conditions. The company's future appears promising, driven by growing demand for its newly launched products and sustained momentum in new enquiries. With a strong product pipeline, including four new brands launched in H1FY25 and several more in development, PI Industries is well-positioned to capitalise on the increasing demand and maintain its growth trajectory in the CSM business. Therefore, we reiterate our BUY rating on the stock, with a revised target price of Rs. 4,480, based on 35x FY26E adjusted EPS.

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SEBI Registration Number: INH20000034