Why PI Industries Share Price is Falling

The agrochemical sector is the backbone of agriculture because it provides essential pesticides and fertilisers that help boost crop yields.

Moreover, the sector has seen massive growth in the past decade.

According to the World Trade Organisation (WTO), India has become the second-largest global exporter of agrochemicals, leaving the United States behind with exports valued at US$ 5.5 billion (bn) in 2022.

Now, despite the sector's overall success, one stock which is the key player in the sector is facing a downturn. The company is none other than PI Industries.

On 12 December 2023, the share price of the company took a hit, dropping by 10%, followed by another 3% on 13 December 2023.

So, the question is, what is causing this selling pressure on PI Industries?

Let's find out!

#1 Entry of a New Rival

The primary reason why the share price of PI Industries came under pressure was because a China based company called Rainbow Agro has set its sights on the pyroxasulfone market with a 2,000 tonne project.

To understand it better, let's have a look at the backstory.

PI Industries is not your basic agrochemical company. It is a market leader in producing a special type of chemical called pyroxasulfone.

This is a unique type of chemical which is used to control grasses, sedges and broadleaf weeds.

Moreover, there is no other Indian player which offers this chemical in the width and consistency that PI Industries does.

It was because of export of pyroxasulfone chemical the company has seen multifold growth in the past few years.

The factors that supported growth was the trade war between China and the US where the US reduced imports and shifted sourcing to emerging hubs.

Moreover, during Covid as well, the Indian agrochemical sector came into the limelight as export orders picked up pace from India.

On the flipside, at this point, there is huge competition coming from China.

One of its prominent players Rainbow Agro is stepping into the pyroxasulfone space. This will not only intensify competition but also take up a significant market share.

Hence, after this news came out investors were concerned about the company's growth prospects and this was followed by a massive sell off in the share price of the company.

What's Next?

Even though there is tough competition coming from China, the company's fundamentals look quite steady as there is high demand for its products worldwide.

#1 A Look at PI Industries' Financials

In the recent quarter gone by, the company's overall revenue from exports grew by 28% to Rs 16,329 million (m) from Rs 12,783 m from the same period last year.

On the other hand, domestic revenues were subdued with a reduction of 2% year on year (YoY) due to the delayed and erratic spread of monsoon.

So, it is safe to say that the company's strength lies in its export business. It also has long term partnerships with more than 20 global customers which includes Kumiai Chemicals, Nissan Chemicals, Mitsui Chemicals, Bayer, and Corteva.

The earnings before interest, tax, depreciation and amortisation (EBITDA) also grew 28% to Rs 5,534 m from Rs 4,331 m during the same period last year.

The profit after tax (PAT) grew 44% to Rs 4,805 m in the quarter under review from Rs 3,348 m during the same period last year.

Gross margins improved to 47%, an improvement of 135 basis points YoY due to better product mix.

#2 Diversification into Pharma Sector

Until 2020, the company had a fairly narrow product portfolio which consisted of custom synthesis manufacturing (CSM).

Yes, the company has a very strong global presence which is obvious when we say that it stood highly profitable during the pandemic as well.

But, bad times don't come with a prior notice and hence, the company was quick to diversify its business by entering into the pharma space and reduced its dependency on agro business.

From this new business, the management is targeting at least Rs 5 bn revenue in the financial year 2024.

Moreover, after the share price of the company fell, the management said that they are very optimistic about the pyroxasulfone market, emphasising that there is substantial room for growth.

The current market size for pyroxasulfone is US$ 600-700 m, and PI Industries envisions the potential for a multi-billion dollar market.

How PI Industries Share Price has Performed Recently

PI Industries share price has dipped over 11% in the last five days.

The company touched its 52-week high of Rs 4,010 on 21 June 2023 and its 52-week low of Rs 2,870 on 28 March 2023.

Foreign Institutional Investors (FIIs) have increased their stake in PI Industries by 4.5% on a year on year (YoY) basis.

As of the September quarter in 2023, FII now accounts for 20.1% of the company's stake, a notable increase from the 16.7% stake they held during the same time last year.

On the other hand, Domestic Institutional Investors (DIIs) have decreased their stake by 3% YoY from 26% to 23.1% in the recent September quarter as compared to the same period last year.

Explore the detailed shareholding pattern here.

About PI Industries

Incorporated in 1946, PI Industries is a leading player in the agro-chemicals space.

It has a strong presence in both domestic and export markets. PI Industries currently operates five formulation facilities and has 13 multi product plants at four locations.

The company has a strong focus on research and development as it has been investing about 3% to 4% of its revenues in this segment.

For more details about the company, you can have a look at the PI Industries fact sheet and quarterly results on our website.

You can also compare the company with its peers.

PI Industries vs Bayer Cropscience

PI Industries vs Dhanuka Agritech

PI Industries vs Rallis India

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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