Prabhudas Lilladher is bullish on Rallis India has recommended buy rating on the stock with a target price of Rs 242 in its research report dated January 18, 2019.
Prabhudas Lilladher's research report on Rallis India
Rallis reported lower than expected results on the back of weak business environment in the domestic market leading to ~270 bps YoY decline in consolidated gross margins to 39.5%. EBITDA margins are subdued both YoY and against our estimates even after factoring one-offs (Rs 116 mn). With change in management, there has been renewed focus on growth. RALI plans to invest Rs 8 bn over the next 5-6 years for capacity expansion and backward integration. On the domestic side the strategy is to improve the range & width of offering apart from revamping the marketing & distribution; on international business front RALI plans to further strengthen its position in products like Pendimethalin, Metribuzin, Poly Ether Ketone Ketone (PEKK), etc by being present in the entire value chain and gaining market share with new capacities. While these measures are unlikely to impact our earnings estimates for next year, RALI's 5-yr capex plan reduces the ambiguity surrounding the long term business growth.
AT CMP, the stock is trading at 12.2x FY21E earnings of Rs 13.5. Maintain Buy with a target of Rs 242.
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