Hold Rallis India; target of Rs 200: Prabhudas Lilladher

Prabhudas Lilladher's research report on Rallis India

Rallis India (RALI) 4QFY23 results were below our and consensus expectations primarily led by (a) domestic crop protection (CP) revenue remaining flat YoY; (b) export revenues up by 7% YoY; (c) seed revenues down 3% YoY to Rs250mn; (d) Gross margins contracting by 800bps YoY to 26.7%, led by provisions of inventory (Rs400mn) & impairment of intangible assets (Rs240mn) in seeds business (Ex- off provisions stood at 39%; PLe 38%);(e) Lower gross profit coupled with higher opex (up 300bps YoY) pertaining to increased A&P spends before kharif season and provisioning of Rs46mn for notice served by MBPT during the year resulting in widening of EBITDA loss at Rs653mn v/s loss of Rs28mn in 4QFY22. Adjusting to the provisions, EBITDA/PAT loss stood at Rs19mn/Rs54mn as against loss of Rs28mn/142mn in the base quarter. Additionally, RALI also launched 3 and 5 new products each under 9(3) and 9(4) category respectively in FY23 while CRAMS gaining traction; MPP plant is nearing completion and is expected to be commissioned by Q1FY24. Maintain ‘HOLD’.

Outlook

We trim our EPS estimates by 16%15% for FY24E/25E citing slower revenue growth and margin pressure, amid forecast of an El-nino event in the upcoming monsoon season. Accordingly, we maintain ‘HOLD’ rating on the stock with revised TP of Rs200 from Rs240 earlier based on 18xFY25 EPS.