Whalesbook
PI Industries Ltd. reported a challenging fourth quarter with a 12% year-on-year revenue decline. The Custom Synthesis Manufacturing (CSM) segment was the primary reason for this drop, experiencing a 15% revenue decrease. This downturn was caused by a global economic slowdown and customers becoming more cautious with order volumes, leading to a 14% reduction in CSM volumes.
Domestic Agri Business Also Affected
The domestic Agri-chemical business also saw its revenue fall by 9% year-on-year. In contrast, the company's pharma business performed well, growing by 23%. While gross margins improved by 280 basis points due to a better product mix and operational efficiencies, lower total volumes negatively impacted operating leverage. This resulted in a 400 basis point decrease in EBITDA margins compared to the previous year.
Motilal Oswal Sees Future Growth
Despite the weak quarterly results, Motilal Oswal has largely kept its earnings forecasts for FY27 and FY28 unchanged. The firm reaffirmed its 'Buy' recommendation for PI Industries with a target price of Rs 3,500. This valuation is based on a Price-to-Earnings (P/E) multiple of 33 times FY28 earnings, which is slightly below the company's average P/E of 37 times over the past six years.
Motilal Oswal is cautiously optimistic about PI Industries' performance in FY27. The firm's positive outlook is supported by a strong order book, confirmed customer commitments, and plans to launch over five new molecules in the CSM segment. These new products are expected to significantly accelerate growth in the latter half of FY27. The company's Biologicals pipeline and potential acquisitions are also seen as key factors for future growth.