Aug 26, 2011, 07.02 PM | Source: Moneycontrol.com
Microsec is bullish on Rallis India and has recommended buy rating on the stock with a target of Rs 190 in its August 19, 2011 research report.
, Microsec |
“Rallis India Ltd (Rallis), subsidiary of Tata Chemicals Ltd is a leading crop protection player. The company sells its products across 80% of India’s districts through the wide range of distribution channels with supportive retailers and dealers. In addition to that, Rallis supplies technical grades and intermediates to the different chemicals and agrochemical companies such as Bayer, Syngenta, Excel, UPL, Gharda, Cheminova, Dhanuka and Nagarjuna. The company has manufacturing units for pesticides and fine chemicals that are located in Ankleshwar, Akola, Turbhe, Lote, Patancheru and Dahej. The flexible manufacturing process enables the company to produce new product in short period of time with cost competitive advantages. It has got ISO 9002 certification for pesticides and fine chemicals plants. By acquisition of 59.02% stake in Metahelix, Rallis has strengthened its position in the seed business.”
“Brand building, distribution networks and maintaining relationship with the end customers through various relationship models help the company to increase market presence and therefore top line growth. Technical innovation capabilities, deep understanding of organic chemistry and systematic development of new products reduces product life cycle which are likely to help Rallis launch 3-6 new products every year that helps the company to have a wide range of crop and region specific product portfolios. Port based Dehaj plant is likely to strengthen international presence through capacity addition for contract manufacturing. Acquiring 59.02% stake in Bangalore based seed research company Metahelix Life Sciences, Rallis can access exclusive hybrid pipelines, regulatory clearance with over 100 hybrids in pipeline, branded Dhaanya seeds, competent research team which help the company to serve farmer in better way that is likely to make Rallis competitive against the peers.”
“We adopted a comparable valuation method to value Rallis based on Price-to-Earning (P/E) multiples. Currently, Rallis is trading at 16.2x on its FY13 EPS (E) of Rs10.04. In the longer run, we expect the company continue to trade at a premium over the peer group average P/E based on its right strategic move and outperformance. As a result, we assign the multiple of 19x and arrive at a target price of Rs190 for the stock. Our target price translates a 17% upside over Rallis’ current stock price,” says Mircosec research report.
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