PI Industries delivered robust September Quarter 2023 numbers. The stock price is down nearly 11% since December 13, 2023.
While many of its peer group has been reporting muted numbers (due to inventory destocking) for the past several quarters, PI Industries is on double-digit revenue track for more than 12 quarters now. The company delivered 22% YoY revenue growth and 43% YoY rise in profit after tax (PAT) in Q2FY24. Revenue came in at Rs 2,117 crore in September Quarter 2023 up 20% YoY compared to Rs 1,770 crore in the same period previous year. Revenue growth was driven by 22% YoY growth in agrochemical exports which constituted 77% of total revenues for PI Industries in Q2FY24. Export volumes rose 21% YoY in September Quarter 2023. Exports mainly constitute custom synthesis & manufacturing (CSM) business. Export and domestic revenues stood at Rs 1,633 crore and Rs 484 crore respectively in Q2FY24. Domestic revenue growth was subdued with a 2% YoY fall in Q2FY24 due to delayed and erratic spread of monsoon.
PI Industries stock price falls 10% intraday
PI Industries has a differentiated business model with CSM as its backbone offering a wide product mix incomparable among its peer group. The company’s unique business model entails global partnerships across the value chain, encompassing custom synthesis and manufacturing, and in-licensing for distribution of agri-inputs in the domestic market. Speaking on the company’s differentiated business model driving robust growth, Mayank Singhal, Chairperson and Managing Director at PI Industries said, “Our model is focused on innovative molecules based on our technical strengths and capabilities and we have seen a export volume growth of 22% YoY in the quarter over last year, while the industry faces headwinds.” He further added that growth was diversified in exports, coming not only from agrochemicals but also from molecules in the other areas like, electronics, imaging and other specialty chemicals.
But PI Industries stock price taking a 10% holy dip on December 13, 2023 indicates that in an uncertain and unpredictable global business environment, no business model is sacred or foolproof.
Revenue guidance maintained, pharma business to deliver strong EBITDA
Rainbow Agro, a Chinese company announced its entry into pyroxasulfone space on December 12, 2023. The company received the Chinese government’s approval to set up a 2000 MTPA plant to manufacture pyroxasulfone. Pyroxasulfone is a herbicide used in weed control mainly for wheat and soybean crops. The molecule has a market size of about $ 270 million and is estimated to more than double by 2030. And pyroxasulfone is one of the major export products for PI Industries and accounts for about one third of its total revenues. The management has denied any adverse impact on the company with the entry of Rainbow Agro in pyroxasulfone space. According to market sources, pyroxasulfone is a patented product in the global markets till 2025. PI Industries has maintained its guidance of 18-20% revenue growth in export business for FY24. The company is confident as it is already on the path of export revenue diversification by entering in pharma CRMO business in 2020. PI Industries acquired Therachem Research Medilab (TRM) and Italy-based Archimica Spa in April 2023. Speaking on pharma business, Mayank Singhal, said, “Our journey in pharma is off to an encouraging start. We continue to work towards developing a differentiated CRO, CDMO and an API-KSM model.” Pharma business contributed Rs 72 crore, nearly 6% of total exports revenue in Q2FY24. According to the management, pharma business will be in a development stage for the next several quarters. Confident and optimistic about pharma business, Rajnish Sarna, Joint Managing Director at PI Industries, said, “Once we get to a maturity level, we will be generating 20%-22% kind of EBITDA margin.” The next few quarters will give a better picture.
