Hold P.I. Industries Ltd For Target Rs.2,569 by Prabhudas Liladhar Capital Ltd
H2FY27 recovery expected to drive FY27 growth
PI reported consolidated revenue from operations of INR17bn, reflecting a 10% YoY decline while 10% QoQ increase led by lower base. The CSM segment, which contributed 76% of total revenue witnessed 12.7% degrowth, impacted due to headwinds from soft commodity prices, genericization pressures across the global agrochemical industry. The management expected this segment to recover in H2FY27, however potential challenges due to external environment can’t be ruled out. New products launched in the last 3 years showed contribution of 16%-18% in Q1FY27. The domestic agchem branded business increased 2% YoY, led by 50% growth in biologicals however the core business was impacted due to strong heat waves, delayed sowing and high inventory from last year. The pharma business, still in its ramp-up phase, reported revenue of INR542mn, contracted by 25% YoY due to order book phasing. The company has onboarded 4 new marquee pharma customers. in the past 12 months.
We expect near-term challenges in the agrochemical space to weigh on overall performance. Concentration towards pyroxasulfone which has gone off patent, would also continue to challenge growth. However, medium-term growth will be supported by biologicals recovery and scale-up in pharma. We estimate consolidated revenue/EBITDA/PAT CAGR of about 6%/5%/-1% over FY26–28E. At CMP, the stock trades at 29x FY28 EPS. We value stock at 30x FY28 EPS, arriving at TP of Rs2,569, and maintain our ‘HOLD’ rating.
Consolidated revenue increases by 9% QoQ and -10% YoY:
Consolidated revenue stood at Rs17bn (-10% YoY/9% QoQ) (PLe: Rs16.6bn, Consensus: Rs17.6bn), actual revenue was inline with our estimates. Gross margin was at 56.7% (vs 57.4% in Q1FY26 and 57.8% in Q4FY26). Absolute Gross profit was at 9.7bn, decreased by 12% YoY but increased 7% QoQ.
EBITDAM contracts by 570bps YoY:
EBITDA came in at Rs3.7bn (-29% YoY/ 9% QoQ), (PLe: Rs3.8bn, Consensus: Rs4.3bn) and EBITDA margin came at 21.6% (vs 27.3% in Q1FY26 and 21.5% in Q4FY26), declined YoY. Reported PAT stood at Rs2,442mn (-39% YoY/ 22% QoQ), with PAT margin at 14% (vs 21% in Q1FY26 and 13% in Q4FY26).
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