Near-term headwinds loom for PI Industries after a good Q1

livemint.com:

bavadharini.ks@livemint.com Investors in PI Industries Ltd stock are treading carefully. The management’s cautious view on near-term outlook could be one reason. Shares of the company are lower by about 1% in the past two trading days even though June quarter (Q1FY24) results were better-than-expected.

Sure, management maintained its revenue growth guidance of 18-20% per annum (excluding pharma business) for FY24, but it also said it would review its guidance post Q2. So far, it has not seen a dramatic change in demand or deferment in orders, said the management in the earnings call. “PI Industries’ business (exp-orts) is into patented products.

So, there are no issues related to excess inventories or pricing pressure from China, as is case with generics segment. However, global uncertainties across markets are to be monitored as they could impact business," said Rohan Gupta, director, Nuvama Institutional Equities. Here, some factors may aid the company’s prospects.

For one, custom synthesis manufacturing (CSM) or exports order book is healthy and should sustain the growth momentum. Additionally, PI Industries has a steady launch pipeline both in exports as well as in the domestic market. For instance, it plans to commercialize 4-5 products every year in its CSM export business.

That apart, pharma business is expected to boost revenue gro-wth in the coming years. The company has also planned for capital expenditure spending for FY24 of ₹850-900 crore for its agrochemical business. Coming to Q1 results, consolidated revenue rose by 24% year-on-year to ₹1,910 crore.