Near-term concerns likely to weigh on growth trajectory of PI Industries

PI Industries stock has fallen 18 per cent since August on weak Q1 results, muted export outlook and biologics curbs, though brokerages remain positive on long-term growth

The stock of agrichemicals company PI Industries is down 18 per cent since August and is trading at six month lows. The correction in the stock (current price of Rs 3,491) was due to the company’s weak performance in the June quarter (Q1) and muted near-term outlook for the export market, where global customers are destocking.

 

Alongside, regulatory headwinds in the domestic biologics segment dented PI’s Q1 performance and is expected to weigh on growth in Q2 as well. Despite correcting, the stock is trading above the sector average offering and offers little upside from current levels.

 

PI’s revenues declined by 8 per cent in the June quarter from the previous year due to weak export performance. Agrichem exports (custom synthesis and manufacturing, or CSM, segment) which accounts for 78 per cent of the company’s revenue slipped 14 per cent. The fall in CSM was led by a 9 per cent dip in volumes even as the new products’ share in sales increased 46 per cent from the previous year. The company plans around seven new products/molecules for commercialisation in FY26.

 

PI’s domestic business fared better, reporting 6 per cent growth in sales on the back of a 7 per cent rise in volumes. Excluding biologics, the domestic segment saw a 13 per cent growth in sales. Regulatory changes affected biologics, a segment that accounts for a fifth of domestic sales. While the issue is expected to be resolved shortly, India temporarily discontinuing the registration of biological products used in agrichemicals is expected to impact the September quarter as well.

 

Though the company’s gross margins expanded by 570 basis points to 57.4 per cent, operating profit margin declined by 90 basis points to 27.3 per cent from the previous year. This was due to higher employee expenses and other expenses. The company has maintained its mid-single-digit revenue growth for FY26 with an operating profit margin of 25 per cent to 27 per cent and gross margin in the 50 per cent to 52 per cent range.

 

Macro challenges are likely to continue in the September quarter followed by a gradual recovery in the second half of FY26. “With early signs of destocking of inventory in most markets and a favorable monsoon, recovery is anticipated in both the export and domestic markets,” said analysts led by Sumant Kumar of Motilal Oswal Research.

 

“The pharma segment also delivered strong growth and guided for an improved margins trajectory with breakeven in the next 12-18 months,” said Motilal Oswal. The brokerage has reiterated a buy rating with a target price of Rs 4,650 per share.

 

Brokerages are positive on long-term growth, but some have revised their estimates downwards or downgraded PI’s stock on near-term concerns.

 

Deven Choksey Research has revised FY26 and FY27 earnings estimated downwards by 4.4 per cent 9 per cent, respectively, citing slower-than-expected recovery in exports due to prolonged customer destocking, and regulatory headwinds in biologicals that have curtailed domestic growth. The brokerage, however, reiterates its accumulate rating as near-term pressures as transient, with a recovery in the second half led by exports and new launches. PI’s strong pipeline and growing pharma contract research and development underpin sustainable growth, said Ishank Gupta, an analyst at the brokerage.

 

Sani Vishe and Shivani More, analysts at Axis Securities, believe that near-term industry challenges with tariff-related uncertainties and high inventory levels among global innovators are likely to limit revenue growth in FY26. The brokerage has lowered its estimates but continues to value PI’s stock at 28 times its FY27 estimates. It has downgraded the rating to hold from buy with a revised target price of Rs 3,930 per share.