PI Industries pins hope on Q4. Why investors arent buying the optimism?

At the core of this disappointment is its custom synthesis and manufacturing (CSM) business, which forms over 70% of revenue. The segment’s revenue dropped year-on-year for the fourth consecutive time in Q3FY26, led by weak volumes amid cautious scheduling of orders by customers.

The management hopes there will be a gradual uptick in the CSM business from Q4 onward, with stronger momentum expected in FY27. It said channel inventory in the global crop chemicals market has been normalizing and customer buying is improving, although product prices remain soft, particularly in the generics category.

But steep earnings downgrades by various brokerages suggest not everyone shares the management’s optimism. JM Financial Institutional Securities does not see any material improvement in PI’s revenue at least till end-2026, and has cut FY26-28 earnings per share estimates by 16-18%.

Slow demand from Kumiai Chemicals, threat of upcoming pyroxasulfone generics in the US and continuing struggle for growth in the ex-pyroxasulfone product portfolio over the last five to six years are seen as dampeners by JM Financial.

Japanese agrochemical giant Kumiai—PI’s large customer—reduced its FY26 revenue and profit guidance amid pricing pressure and muted herbicide demand in some overseas markets. PI supplies herbicide pyroxasulfone to Kumiai.

The pricing pain may not be over yet. Nuvama Research said pyroxasulfone prices have dipped by around 18% year-on-year to $69/kilogram, thus indicating further margin challenges in this business.

PI’s consolidated Ebitda margin declined by almost 500 basis points year-on-year to 22% in Q3FY26. FY26 Ebitda margin guidance has been maintained at 25%-26%. “While five new molecules have been commercialized in the CSM business in 9MFY26, we do not foresee them being able to offset price declines in Pyroxasulfone,” added Nuvama’s 13 February report.

PI has been diversifying into other businesses and aims to increase investments and launches in biologicals, pharmaceuticals CRDMO (contract development and manufacturing organization), and electronic chemicals platforms. But these are still at a nascent stage, so meaningful earnings contributions from them will take time.

The stock has declined 18% in the last six months, and a fast reversal seems unlikely unless the CSM business shows sustained improvement. PI’s shares trade at FY27 price-to-earnings of 30x, showed Bloomberg, which is not attractive in the current scenario.