PI Industries stock down 11.2% in two sessions; here’s why


Shares PI Industries faced significant downward pressure in the last two trading sessions, witnessing an almost 11.2% decline from 3,869 to 3,426 apiece. This downturn is attributed to recent media reports suggesting pressure on the company’s key product, pyroxasulfone, due to capacity additions by a Chinese company, Shandong Weifang Rainbow Chemical.

As per the reports, Shandong Weifang Rainbow Chemical has announced its foray into the manufacturing of pyroxasulfone, with a 2,000 MTPA plant. This has raised concerns among investors about potential adverse effects on PI Industries’ revenues tied to pyroxasulfone.

However, the management has denied any such news of a negative impact on the company, calling it mere speculation, and indicated that there is no such stress on the company’s full-year guidance and growth. It further highlighted that pyroxasulfone is a patented product (until 2025 in developed markets) and will not have much impact from the upcoming Chinese facilities.

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Further, the global agrochemical industry is still witnessing oversupply from China and lower demand in key geographies, such as Latin America. The anticipation of global stress catching up with PI is another reason why the stock has been under pressure, said domestic brokerage firm Motilal Oswal.

On the other hand, Kumiai has cut its FY24 guidance, thereby indicating demand pressure. Since Kumiai is one of the largest clients of PI, a guidance cut translates into a weak outlook for the company, the brokerage added. 

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Motilal Oswal expects PI to sustain near-term growth momentum, led by consistent growth in the CSM business. The factors contributing to this outlook include a substantial order book (USD 1.8 billion), accelerated commercialisation of new molecules (with plans for 4-5 launches annually), increased sales of existing molecules, domestic market product launches (7 in FY23 and plans for 5 in FY24), and recent acquisitions in the pharma API and CDMO sectors.

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Despite the positive trajectory, the brokerage highlights key monitorables, including the new capacities, demand landscape, and realising the potential of pyroxasulfone.

The brokerage projects a revenue, EBITDA, and PAT CAGR of 22%, 26%, and 24% for FY23–25E. It maintains a ‘buy’ rating on the stock with a target price of 4,480 apiece. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 13 Dec 2023, 03:54 PM IST

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