ICICI Direct recommended hold rating on Rallis India with a target price of Rs 165 in its research report dated July 22, 2019.
ICICI Direct's research report on Rallis India
Rallis reported revenue growth of 8.7% YoY to Rs 623.2 crore driven by standalone crop protection business. The revenue from international business grew 12% YoY to ~Rs 142 crore. The company clarified that it had sold some seeds through Rallis’ channel partner in Q1FY19. Hence, adjusting that in standalone accounts, the domestic business witnessed growth of 15% YoY to ~Rs 221 crore. Metahelix registered 2.6% YoY growth to Rs 260.1 crore. EBITDA margins expanded 70 bps YoY to 15.2% due to lower other expenses post Ind-AS 116 adoption. This resulted in EBITDA growth of 14% YoY to Rs 94.8 crore. Lower tax outgo led bottomline to post 23.8% YoY growth to Rs 67.6 crore.
Moreover, monsoon progress is likely to drive Kharif acreages, going ahead and, thereby, better visibility in domestic crop protection business. We value the company at P/E multiple of 16x on FY21E (implied EV/EBITDA of ~9.9x). We arrive at a target price of Rs 165 with HOLD rating.
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