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Weak quarter as macro headwinds persist

Operating performance beats estimates

? PI Industries (PI) reported a muted quarter as revenue declined 16% YoY due to 13%/18% YoY drop in domestic agrochem/CSM revenue. However, pharma revenue surged ~54% YoY (3% mix). Consolidated EBITDA margin expanded 60bp YoY, led by a 550bp gross margin improvement, offset by higher employee/other expenses. Higher expenses were due to strategic development and promotion expenses of new businesses. ? Macro headwinds persisted through 2Q and may continue in 3Q, with a gradual recovery likely from 4Q onward and a normalization likely in FY27. Early indicators of a strong rabi season, supported by a favorable monsoon and healthy reservoir level,signal improving demand prospects. ? Factoring in the weak performance, we reduce our FY27/FY28 earnings estimates by 6% each while broadly maintaining our FY26E earnings. We reiterate our BUY rating with a TP of INR4,260 (based on 36x Sep’27E EPS).

Broad-based decline; margins steady

? Consolidated revenue stood at INR18.7b (est. INR17.7b), down 16% YoY. ? EBITDA stood at INR5.4b (est. INR4.3b), down 14% YoY. EBITDA margins expanded by 60bp YoY to 28.9% (est. 24.5%). Gross margins expanded 550bp YoY to 57.3%. Employee expenses rose 300bp YoY to 11.8%. Other expenses increased by 190bp YoY to 16.6% of sales. Adj. PAT was down 19% YoY at INR4.1b (est. INR3.3b). ? Agrochemical (CSM export and domestic agrochem) revenue stood at INR18.1b (down 17% YoY), EBIT declined 18% YoY to INR5.9b, and EBIT margin came in at ~32.7% (down 30bp YoY). ? Export (CSM) revenue fell 18% YoY to INR14.1b. Domestic agrochemical revenue declined 13% YoY to INR4b, while volumes were down 9% due to the erratic rainfall disrupting the demand. ? Pharma revenue stood at INR634m (~4% of export revenue), up 54% YoY. ? For 1HFY26, revenue/EBITDA/adj. PAT dipped 12%/12%/15% to INR37.7b/INR10.6b/INR8.1b. ? Gross debt stood at INR1.8b as of Sept’25 vs. INR1.1b as of Mar’25. CFO stood at INR2.5b as of Sep’25 vs. INR8.0b as of Sep’24

Highlights from the management commentary

? Outlook: Macro headwinds are expected to persist, underpinned by climatic volatility, evolving structural shifts among global innovators, and ongoing geopolitical supply-chain disruptions. Management reiterated its EBITDA margin guidance of 26-27%. PI commercialized eight new molecules in 1HFY26 (five in agchem and three in domestic segment).

? Biological: The segment is emerging as a key long-term growth driver, with strong early traction. PI is building a global product portfolio and new research infrastructure to become a leading domestic player despite near-term margin pressure from ongoing investments and regulatory disruptions. ? Pharma business: The segment continues to build strong momentum, with revenue doubling in 1HFY26 and onboarding of several new CDMO clients, supported by steady investments in capabilities, infrastructure, and late-stage programs. Profitability was affected by one-off costs and product mix.

Valuation and view

? PI’s growth trajectory is expected to remain muted and a gradual pickup is expected from 4QFY26, led by an improving demand scenario and a strong rabi season. ? The company’s medium- to long-term growth story will be led by 1) stable growth momentum in the CSM business due to the rising pace of commercialization of new molecules, 2) biological industry continuing to outpace the chemical industry, and 3) the ramp-up of its pharma business. ? We expect a CAGR of 7%/6%/5% in revenue/EBITDA/adj. PAT over FY25-28. We reduce our FY27/FY28 earnings estimates by 6% each while broadly maintaining our FY26E earnings. We reiterate our BUY rating with a TP of INR4,260 (based on 36x Sep’27E EPS).

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