P I Industries Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Strong quarter, guidance raised: Revenue grew 24% YoY driven by 30% export volume growth, and CSM growth guidance was lifted from 18-20% to 20% plus despite global uncertainty.
• Order book holds at \$1.4 bn: The dollar order book stayed flat as strong order filling matched new additions; management expects it to improve from here as inquiries convert.
• Capex signals ambition: The board raised the capex plan to ₹600-700 crore for organic business, with total investment including inorganic and pharma exceeding ₹2,000 crore.
• Pharma and non-agchem are early but real: A new pharma MD joined, organic R&D is underway, and the non-agchem pipeline holds 40+ products, though neither contributes meaningful revenue yet.
• What to watch next quarter: Whether the order book expands as promised, domestic volume growth picks up with the season, and any inorganic deal materializes from the shortlist.

Revenue Performance & Drivers

• Volume-led export growth: Exports grew 42% YoY, with ~30% from volume scale-up and ~12% from favorable price and currency; overall revenue growth was mainly volume-led with price corrections for cost pass-through.
• Domestic lagged on delayed monsoon: Domestic revenue growth was price-driven with little volume uptick because the monsoon arrived late and sowing was delayed; growth is expected to pick up from Q2 when new product seasons begin.
• CSM order filling stayed strong: The CSM segment delivered 40% growth while the order book held at \$1.4 billion, indicating new order intake kept pace with revenue conversion.
• Input cost pressure managed: Elevated input costs were partially passed through via higher product prices in both exports and domestic; gross margin edged up 8 bps to 44% on cost pass-through and favorable mix.
• Inventory built deliberately: Inventory rose ₹152.3 crore to manage supply chain disruption and ensure continuity of customer supply schedules.

Rajnish Sarna: "So I'll not say conservative, but yes, this is a very cautious guideline. And we are always, as a Company, we are happy to deliver better than what we guide."

CSM: Commercialization & Capacity

• Seven new molecules targeted this year: One was already commercialized in Q1; the pace of launching new molecules has picked up and demand from global customers remains upbeat.
• Throughput gains continue: The company improved throughput by close to 15% last year and efforts to increase efficiencies are ongoing.
• New MPPs ramping: Two multipurpose plants commissioned in Q2 are at 55-60% utilization; management expects them to reach 85-90% in roughly 1.5 years as volumes scale.
• Global customer sentiment positive: PI is participating in many interesting new launches and large blockbusters through AI or intermediate supply, with very positive commentary from large global customers.
• CSM growth visibility: Management sees a 20% CAGR over the next three years as visible, and believes doubling agchem exports over three to five years should not be a challenge given the pipeline.

Mayank Singhal: "Doubling should not be a challenge over the next 3 to 5 years. Looking at that scenario with new innovation and ideas, it is this opportunity that our pipeline plans can most likely grow at twice the rate of the industry levels."

Capex & Investment Outlook

• Organic capex raised: The board increased the FY23 capex plan from ~₹500 crore to close to ₹600-700 crore, driven by capacity expansion and new initiatives.
• Total investment exceeds ₹2,000 crore: The ₹650-odd crore organic capex sits alongside targeted inorganic opportunities and pharma initiatives that together sum to more than ₹2,000 crore.
• Capex can be reviewed: Management noted it can always revisit the investment situation in coming quarters based on traction.
• Asset turnover ambition: The company is targeting close to 2.2x plus gross block to asset turnover in the future.

Diversification: Pharma, Non-AgChem & Electronics

• Pharma leadership in place: Mr. Anil Jain joined as Managing Director of PI Health Sciences, bringing experience from leading Sun Pharma's API business at a global level.
• Organic pharma work underway: PI has been working organically for 1.5 years on certain intermediates in R&D and pilots, and commercialized a couple of products with supplies last year.
• Pharma inorganic priority: The company is looking at an inorganic approach to bolt up pharma to a different level and is actively evaluating shortlisted opportunities, though putting a timeline is difficult.
• Non-agchem pipeline building: A pipeline of more than 40 products is at different development stages, with a substantial number being non-agchem; these do not yet have meaningful order book representation but are expected to become a reasonable-sized business in years to come.
• Electronic chemicals scaling: A couple of products were commercialized last year and are being scaled up this year, with capacity expansion at commercial and pilot scale; management declined to quantify the opportunity at a product-specific level.
• Azide chemistry operationalized: Successfully developed and deployed across multiple verticals including specialty chemicals like electronics.

Domestic Business & New Products

• Six new products launching in FY23: Q1 saw the launch of herbicide PROVIDE, insecticide DINOACE for cotton, and combination fungicide SECTIN for horticulture; upcoming launches include BROFREYA and ULTIMARE in the JIVAGRO portfolio.
• AWKIRA brand gaining traction: Launched around three years back, the brand is performing well; most products' seasons start from Q2.
• Q1 is seasonally generic-heavy: The first quarter typically carries more generic products because it is a three-month placement period; new product sales begin from Q2 onward as they are placed closer to the season.
• Biologicals portfolio expanding: The company is augmenting its biologicals portfolio with a strong pipeline and is excited about products coming shortly.
• Digital growth platform investment: PI is investing to create a digital growth platform through integrated programs, aiming for a long-term sustainable digital edge.

Inorganic Strategy & Order Book

• M&A remains a top agenda: Diversification into adjacencies through the inorganic route is a priority; the company has screened and evaluated several opportunities and is zeroing down on certain targets in India and outside.
• Order book expected to expand: Management expects inquiries to reflect in order book expansion in coming quarters and says it will certainly improve from the present \$1.4 billion level, though it is difficult to quantify whether it reaches \$1.5 billion, \$1.75 billion or \$2 billion.
• Non-agchem not yet in order book: Non-agchem products do not have meaningful representation in the order book today, but at some stage the company will get into longer-term understandings for strategic products.
• European gas situation: Management acknowledged difficulty in estimating the far-reaching impact of European gas concerns but stated no direct impact on sourcing is seen, and ad hoc opportunities generally do not fit PI's business model.

Rajnish Sarna: "But many a times, it is very difficult to anticipate and also estimate the far-reaching impact of this."

Guidance & Commitments

Key Metrics