IGI Logo

Facing Headwinds on Multiple Fronts; Downgrade to HOLD

Est. Vs. Actual for Q1FY26: Revenue - MISS; EBITDA - MISS; PAT - MISS  

Change in Estimates post Q1FY26

FY26E/FY27E: Revenue: -2%/-5%; EBITDA: -2%/-5%; PAT: -5%/-5%

Recommendation Rationale

Biological Segment Impacted by Regulatory Changes: PI Industries’ domestic business reported 6% YoY growth in Q1FY26, reaching Rs 339 Cr, with domestic revenue excluding biologicals rising by 13% YoY. Revenue from biological products declined ~38% YoY due to regulatory changes in Jun’25, which impacted sales across the industry. Additional challenges included cash flow pressures from fertiliser shortages, low commodity prices, and elevated channel inventory.

Persistent Pressure Agchem Exports: Agchem exports revenue declined by 14%, with 9% decline in volumes, in line with the customer delivery schedule to balance the inventory levels.  As per the management, the company had factored in transitional softness for FY26 and expects momentum to resume in H2. Notably, new products contributed 46% YoY growth in Q1, and six to seven new products/molecules are planned for commercialisation in the remaining quarters.

CRDMO Driving Growth: The Pharma segment delivered robust growth of 186% YoY. Strong traction in new business inquiries is supported by aggressive investments in business development. The company is advancing its integrated CRDMO platform as the shift towards a CRDMO-led business model involves actively restructuring the product mix and onboarding new customers. Management expects over 75% revenue growth in FY26 for the Pharma segment, augmented by margin expansion.

Sector Outlook: Cautiously Optimistic

Company Outlook: Management anticipates revenue growth to remain in the single-digit range for FY26, reflecting ongoing global headwinds in the industry, while margins are expected to remain stable. The Domestic Agri Brands segment is projected to sustain its growth trajectory, supported by new product launches and a focused crop solutions approach. The CSM Exports business is expected to continue benefiting from its strong product portfolio and development pipeline, ensuring long-term growth visibility. PI maintains a robust pipeline of over 20 products at various stages of development and registration, which is expected to drive medium-term growth. The company has allocated Rs 700-800 Cr for Capex in FY26.

Current Valuation: 28x FY27E; (Earlier: 28x FY27E)

Current TP: Rs 3,930/share; (Earlier TP: Rs 4,150/share)

Recommendation: We downgrade our rating from BUY to HOLD on the stock as the challenges are expected to continue in the near term, and we await clear signs of a sustained recovery.

Financial Performance:

The company’s performance fell short of expectations across all parameters. Consolidated revenue stood at Rs 1,901 Cr, down 8% YoY but up 6% QoQ, missing the estimate of Rs 2,255 Cr. Gross margin improved to 57.4%, up from 51.8% in Q1FY25. EBITDA came in at Rs 519 Cr, marking an 11% YoY decline but increased by 14% QoQ, 19% below estimates. EBITDA margin stood at 27.3%, compared to 28.2% in Q1FY25 and 25.5% in Q4FY25. PAT was reported at Rs 400 Cr, down 11% YoY but up 21% QoQ, falling short of the Rs 466 Cr estimate.

For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home

SEBI Registration number is INZ000161633