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CSM drag to persist over the next 2–3 quarters

PI Industries reported consolidated revenue of INR17bn in Q2FY27, declining 9% YoY while remaining flat QoQ. The CSM segment continued to face headwinds, with exports declining 18% YoY, driven by a 3–4% decline in volumes and a 13–14% impact from pricing and cost pressures, amid genericisation of key molecules and weak global agrochemical demand. Management expects these headwinds to persist over the next 2–3 quarters, with some recovery in volumes towards the end of FY27. The domestic Agri business grew 19% YoY, supported by differentiated products and 45% growth in biologicals. Global biologicals revenue increased by over 250% YoY, aided by a 3x expansion in distribution reach. Pharma revenue grew 20% YoY, while the company continues to invest in customer relationships and capability development. However, elevated input costs and pricing pressure weighed on profitability, with management guiding for gross margins of 48–49% till industry headwinds persist, compared with the earlier level of 57–58%.

We have cut our FY28E/FY29E EPS estimates by 39% each, factoring in lower gross margin guidance and continued weakness in CSM exports. We expect near-term challenges in the global agrochemical industry to weigh on performance. While growth in domestic and global biologicals, along with the scale-up of Pharma CRDMO, offers medium-term growth opportunities, these businesses will take time to meaningfully offset weakness in the core CSM segment. We remain cautious on the stock. However, due to ~19% decline in stock price, we maintain our recommendation to Hold.

Consolidated revenue declined 9% YoY while remaining flat QoQ:

Consolidated revenue stood at Rs17bn (-9% YoY/flat QoQ) (PLe: Rs18.1bn, BBG: Rs17.7bn), topline was 6.5% below our estimates. H1FY27 revenue stood at Rs34bn, down 9.8% YoY. Gross profit stood at Rs8.4bn (-21.5% YoY/ -13% QoQ) with gross margin declining sharply to 49.5% (vs 57.3% in Q2FY26 and 56.7% in Q1FY27), margins declined due to higher RM cost

EBITDAM contracts by 1,520bps YoY:

EBITDA came in at INR2.3bn (-57% YoY/ -37% QoQ) (PLe: INR4.1bn, BBG: INR3.9bn). EBITDA margin declined to 13.7% (vs 28.9% in Q2FY26 and 21.6% in Q1FY27). Reported PAT stood at INR1.2bn (-70.1% YoY/ -50% QoQ) (PLe: INR2.9bn). PAT margin came in at 7.2% (vs 21.9% in Q2FY26 and 14.3% in Q1FY27). Higher effective tax rate of 33.6% (vs 22.1% in Q2FY26) further impacted profitability

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