PI Industries Ltd is one of the few outliers in the farm inputs stocks.While most stocks are struggling to hold on to their gains, PI Industries stocks doubled in the past one year. What is deriving the stock? In short : strong financial performance and business prospect.

Revenues in the first half of the current fiscal year surged 62%. The growth is led by custom synthesis. Production ramp-up of existing molecules doubled revenues at the segment. The domestic agriculture inputs business registered healthy double-digit growth rates. But with exports increasing at a faster pace, the company also benefited from a weak rupee. Hence, operating profits jumped 84% and profits after tax zoomed 111% to Rs.103 crore.

What’s more, the management expects the custom synthesis business to continue to deliver strong performance. Custom synthesis is similar to contract research and manufacturing services undertaken by the pharmaceutical companies. PI Industries focuses on patented molecules and looks for tie-ups in the early stages of product life cycles. From $307 million in June, orders for this increased to $334 million by the end of September.

Encouraged by order inflows, the management increased its revenue guidance for the current fiscal year. Against the earlier growth of 30%, the management expects the revenues in the current financial year to increase by about 40%, broking firm Prabhudas Lilladher Pvt. Ltd said in a note. More than the revenue upgrade, what analysts are enthused about is the opportunity the custom synthesis offers.

According to Edelweiss Securities Ltd, PI Industries has 13-14 products that are in the early stage of their life cycles. One product has been commercialized in the first half of the current fiscal year and the company is estimated to commercialize two more in the rest of the year. As the company launches new products and production at the new facility (Jambusar special economic zone in Gujarat) gathers steam, the business is expected to enter strong growth phase over the next couple of quarters. HDFC Securities Ltd expects the segment’s revenues to double in two years.

“Here again the rate of commercialized molecules are increasing and we are witnessing strong and consistent growth. The Jambusar SEZ facility is an additional trigger that will keep supporting growth. We are enthused by the uptake in the first phase and we have initiated the next phase that will be implemented over the coming few quarters,” Mayank Singhal, managing director and chief executive officer of PI Industries, said in a statement.

The optimism has driven up the stock and valuations. The stock is now valued at 14 times one-year earnings estimates. While Rallis India Ltd is trading at an estimated price to earnings multiple of 18 times (2014-15), for PI Industries to close the valuation gap, the company needs to continue to deliver strong growth in earnings.