PI Industries shareholders await Kumiai earnings after the worst fall in stock since March 2020

Pyroxasulfone contributes 35-38% to PI Industries' total revenue and around 55% to the exports in the custom synthesis manufacturing (CSM) segment.

In FY23, the CSM business accounted for 78% of consolidated revenue and 83% of EBITDA. Pyroxasulfone is one of PI’s key molecules.

 

PI Industries has headquarters in Gurugram and a market capitalisation of over ₹53,000 crore as of December 13, 2023.

Dependence on one major product has been flagged off a risk by analysts in the past as well. The Tokyo-based Kumiai Chemical Industry, one of PI’s biggest customers for Pyraxosulfone, has also warned of a rise in channel inventory.

Kumioi's earnings for the period November 2022 to October 2023 that are due today (December 13) will be important for PI Industries and its shareholders.

It may give them a better idea on the prospects for the product, its patent and the competition. If the commentary from Kumiai is positive, PI Industries' shares may see some reversal as well.

Pyroxasulfone has patent protection in key markets like the US but it went off-patent in other markets like Australia and India, US in the last two years.

However, this doesn't pose a risk for PI Industries, according to Nuvama, an investment advisory and wealth management firm in Mumbai.

Immediate impact on profitability would be limited due to contract with Kumiai Chemical  and limited erosion on molecule pricing for PI Industries, the report said.

"Global demand for pyroxasulfone has been robust, as reported by Kumiai Chemicals (developer) in 2022, with 53% year-on-year growth. Pyroxasulfone was one of the key factors for PI’s strong performance over the years, shielding it from global headwinds in the agrochemical industry,” Mumbai-based broking firm Motilal Oswal said.

PI's CSM business specialises in agrochemicals, primarily patented molecules, which account for 90% of revenue. The company collaborates with global agrochemical innovators to optimise the manufacturing process, reduce costs, and enhance product quality.

PI has clocked an compounded annual growth rate of 18% in the seven years ending March 2023. It has also sustained a margin of over 20% in the same period. The margin for FY23 was 24%.

The company's management has given a guidance of 20% growth led by new launches.

PI Industries has also expanded into pharmaceuticals to reduce its dependency on Pyroxasulfone.