Reduce Rallis India; target of Rs 112: KRChoksey

“Rallis India reported topline de-growth of 12% y-o-y to Rs 216 crores for Q4FY12 and 14%YoY de-growth in standalone revenues to Rs 199 crores. Below than expected results was largely on account of lower volume growth impacted by erratic rainfall & low pest occurrence. Consequently, farmers resorted to conventional low value products. EBITDA margins declined by 1,154 bps y-o-y on account of high employee costs and other expenses (242bps and 376bps respectively). Consolidated PAT stood at Rs 10 crores, impacted by forex gain of Rs 4.4 crores and exceptional item of Rs7.0 crores(Cessation of turbhe plant) Consolidated net profit included loss of Rs 1.9 crores on account of Metahelix.”

“Rallis India posted degrowth of 12% in net revenues to Rs 216 crores for Q4FY12. The reasons for lower than expected growth are eratic rainfall, low productivity, poor crop economics with reduced acreages which have resulted into lower number of sprays and preference of low value molecules. Consolidated margins declined 1,154 bps YoY on account of higher employee costs (242bps YoY) and other expenses (376bps YoY). As a result EBITDA dipped 658bps YoY to 5.7%. Company reported a Net profit of 10 crores (down 48%YoY).”

“During the quarter, Dahej facility has ramped up to full capacity utilization. Rallis also acquired majority stake of 51% in Zero Waste Agro Organics Private Limited (ZWAOPL), a Maharashtra based organic manure and soil conditioners manufacturing company at an all cash deal of Rs 29 crores. The management expects revenue from the business to exceed Rs 100 crores cumulative over a 5 year period. We believe the near term profitability to remain under pressure on account of unfavourable climatic conditions, low pest occurrence & low farmer profitability. Consequently we have revised our estimates downwards to factor in low domestic volume growth. However we do remain positive on Rallis India’s capability to leverage on its superior product portfolio, strong marketing & distribution channel to tap opportunities in difficult times. We recommend a ‘REDUCE’ on the stock with a price target of Rs 112 (P/E 15x FY13E earnings),” says KRChoksey research report.   

Institutional holding more than 40% in Indian cos

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