Accumulate Rallis India; target of Rs 204: JRG Securities

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Accumulate Rallis India; target of Rs 204: JRG Securities

JRG Securities is bullish on Rallis India and has recommended accumulate rating on the stock with a target of Rs 204 in its August 25, 2011 research report.

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RELATED NEWS Buy Engineers India; target of Rs 322: Hedge Equities Buy Infosys; target of Rs 3200: Angel Broking Buy Titan Industries; target of Rs 250: Prabhudas Lilladher ALSO READ See previous views by JRG Securities See what other Experts & Brokerages are saying about Rallis India See messages about Rallis India Rallis India BSE | NSE 30/05/12 Are Mutual Funds betting on Rallis India?

JRG Securities is bullish on Rallis India and has recommended accumulate rating on the stock with a target of Rs 204 in its August 25, 2011 research report.

"Rallis recorded solid Top-line growth in the June quarter backed by robust performance in its newly acquired seeds company Metahelix. High growth in Sales was aided by steady progress of July monsoon which enabled improvement of sowing and crop acreage in cotton, groundnut and pulses meanwhile domestic business performance was further enhanced by successful product launches in both the crop protection and seeds space. Net Sales accelerated by 49% YoY and 33% QoQ to Rs 2916 Mln (Q1, 12), while on a standalone basis its growth stood at 19% YoY and 6% QoQ to Rs 2327 Mln (Q1, 12).  While the quarterly performance of Metahelix was firm, management commented that for the rest of the year, growth in seeds business will not be matching Q1 as seeds sales in India are highly seasonal and Q1 (Kharif season) contributes almost 60% of the full year revenues."

"With strong Sales growth, margins too saw significant improvement. On a cumulative basis OPM's stood at 14.6% (Q1, 12) whereas on standalone basis it improved by almost 200 bps to 13.1% (Q1, 12). Amelioration in margins was led by the newly acquired seeds business which managed OPM's of over 20% for the quarter under review. Total standalone operating expenses of the company gained 15% YoY and 5% QoQ to Rs 2069 Mln (Q1, 12) while on a consolidated scenario expenses moved up by 41% YoY and 29% QoQ to Rs 2540 Mln (Q1, 12). No doubt EBITDA saw stupendous growth (specifically on the cumulative basis) of 92% YoY to Rs 435 Mln (Q1, 12)."

"Backed by its state of art manufacturing facilities, solid distribution network, strong R&D; we maintain our bullish view on Rallis. Lately, the stock has witnessed healthy upmove and is currently trading above our initial Target of Rs 163 (Post Split). At the Trailing market price of Rs 167, Rallis is trading at 19.4X and 16.3X its FY 12E and FY 13E earnings which looks stretched. We recommend an Accumulate on Declines strategy on the stock for a 12 months target of Rs 204," says JRG Securities research report.

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