PI Ind sees strong FY23 demand outlook but raises sales guidance only a little

4 Aug 2022

The upward revision by PI Industries Ltd in its revenue guidance was not significant nor specific. The company has announced a slight enhancement of revenue guidance for 2022-23 (Apr-Mar) to 20%-plus from 18-20% given in May.

The company’s management told analysts in a post-earnings conference call today that it is mindful of uncertainties in current global scenario and therefore cautious in the revenue guidance.

This, however, stood in contrast with the strong demand-led revenue growth outlook made by the company for the current financial year.

In particular, PI Industries is expecting a continued scale-up in overseas demand for its custom synthesis and manufacturing (CSM) products with robust momentum in new enquiries and conversion to continue.

The June quarter saw the company deliver a 30% jump in exports volume, which were largely CSM product based. Export sales increased sharply by 42% and accounted for 74% of total net sales which rose 39% to 2.6 bln rupees.

PI Industries became more dependent on export-driven revenue growth in Apr-Jun as the domestic revenue was up by merely 4% and probably saw a flat or slightly lower volume as compared to the year ago period. The company sells insecticide and other agrochemical products to farmers and other customers in the country.

The company told analysts in response to a query that the export sales emanated from the CSM order book which stood at $1.4 bln at the start of the quarter. But the order book has got filled up and continues to stand at $1.4 bln at the end of the June quarter, the company said.

“Given current uncertain environment… our customers and suppliers want a normalization of scenario before entering into long-term contracts,” a senior management official said during the analyst call.

The projections of robust demand momentum were based on volume estimates provided by PI Industries’ customers.

Even though the company is confident of expanding operating profit and margin, the ability of the company to sustain price hikes in the domestic agrochemical segment and overseas CSM segment will also be tested if the commodity price cycle trend turned adversely and cost headwinds sustained.

This is seen from the fact that in the Apr-Jun quarter the operating margin expanded by just 9% or 180 bps to 22.1% even as the operating profit jumped by 40%.