Accumulate PI Industries; target of Rs 4330: Deven Choksey

Deven Choksey's research report on PI Industries

Consolidated revenue for the quarter came in at INR 19,005 Mn. down 8.1% YoY (+6.3% QoQ), stood sharply below our estimates, due to subdued growth in the exports segment, partially offset by mid-single digit growth in the domestic segment. EBITDA stood at INR 5,191 Mn., down 11.0% YoY (+13.9% QoQ), stood sharply below our estimates, led by a sharp miss in revenue and higher-than-expected employee expense. Adjusted net profit declined by 10.9% YoY (+21.0% QoQ) to INR 4,000 Mn., sharply below our estimates, led by poor operational performance. Gross Profit margin expanded by 565bps YoY (+236bps QoQ) to 57.4%, led by a favorable shift in product mix towards higher-margin molecules, coupled with cost optimization efforts and stronger momentum in margin-accretive segments. EBITDA margin contracted by 88bps YoY (+182bps QoQ) to 27.3%, driven by higher development spend observed in pharma segment, incremental overheads from growth initiatives, and negative operating leverage, partially offset by improvement witnessed in gross margins.

Outlook

We have rolled forward our valuation to Jun’27 estimates. We value PI Industries at 32.0x Jun’27 EPS (near to its 10-year Avg. NTM P/E), implying a target price of INR 4,330. PI Industries is currently trading at 34.0x/29.3x of our FY26E/FY27E EPS estimates. We reiterate our “ACCUMULATE” rating on the stock as we see near-term pressures as transient, with H2FY26E recovery led by exports and new launches. A strong pipeline and growing pharma CRDMO underpin sustainable growth.