300% return in 4 years; Why brokerage firms are positive on this agrochem play

Brokerage firms are positive on PI Industries Ltd, an agro-chem player, and see a strong upside in the counter. The stock has delivered multibagger returns in the last four years, since the covid-19 pandemic has hit the street. It is picked by the analysts on both technical and fundamental basis.

Shares of PI Industries have surged nearly 4 times to around Rs 4,000-levels since the pandemic. The stock has rallied 30 per cent in the last one year and has been able to deliver double digit returns in the year 2024 so far. Its current market capitalization stands more than Rs 57,500 crore.

PI Industries is one of India’s fastest-growing, globally-integrated, highly-innovative agri-science-solutions companies. After many one-off events globally, starting with Covid-19 to escalating geopolitical tensions arising from the Russia-Ukraine and Israel-Hamas wars, the need to secure food supplies has become the top priority of every nation.

"We believe Indian companies are attractively placed due to lower labour and manufacturing costs, strong R&D backup and good relations with global manufacturers/innovators, which would eventually support growth of domestic contract research and manufacturing services (CRAMS) players," said Anand Rathi Shares and Stock Brokers.

Consequently, the structural growth story of the agrochemicals sector is intact, impelled by rising domestic demand; stagnant arable land; substantial opportunities to explore products going off-patent in the next decade; stringent environmental norms in China, offering domestic manufacturers an edge and e) strategic tie-ups with global giants, it said.

PI Industries has invested to diversify in pharma business and is looking at closing other M&As and capex opportunities. It has strong relations with global innovators, which back growth opportunities.  It has a R&D lab at Udaipur and is working on more than 40 products, which are at various stages of development. It is receiving enquiries from pharma and non-agro customers.

"Over FY 24-26, the company is likely to deliver 15 per cent, 13 per cent and 9 per cent growth in revenue, EBITDA and PAT CAGR respectively. The expected revenue growth would be driven by the bright outlook for domestic agrochemicals, focus on product development and launches, coupled with its strongCSM order-book and rising enquiries," Anand Rathi said.

"The vast amount of cash on its books warrants a premium as it showcases its capabilities to grow organically and inorganically. The stock traded at an average 24 times over FY11-17. We value the company at 35 times FY26e EPS with a target price of Rs 4,600, considering its foray into pharma, recovery in the domestic market and strong growth in itsCSM business," it added.

Promoters of PI Industries own more than 46 per cent stake in the company, while mutual fund houses cumulatively own 16.36 per cent stake in it. Life Insurance Corporation of India also owns more than 2.49 per cent stake in the company.

Reading the technical charts of PI Industries, domestic brokerage firm SMC Global said that the stock quickly bounced back, with prices once again reclaiming a fresh momentum above its 200-day exponential moving average on the daily charts after experiencing a decline to the Rs 3,250 levels. The stock has stayed within a consolidation phase throughout the last month.

"It is seen prices consistently holding above its key moving averages. A noteworthy event has unfolded as the stock has broken out above a rectangle pattern, with momentum intensifying beyond the notable resistance level of Rs 3,750. One can buy the stock in the range of Rs 3,775-3,790 levels for the upside target of Rs 4,150-4,175 levels with stop loss below Rs 3,500 levels," it said.

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