Hold Rallis India; target of Rs 207: Edelweiss
Edelweiss recommended hold rating on Rallis India with a target price of Rs 207 in its research report dated July 18, 2018.
September 18, 2018 / 03:26 PM IST
Edelweiss' research report on Rallis India
Rallis India (Rallis) reported a strong Q1FY19 with consolidated revenue jumping 30% YoY (11% above estimate). This was driven by 45% YoY spurt in standalone agrochemical operations due to increasing price, low base (GST impact) and majorly from higher placement of generic products which also impacted gross margin—down ~770bps YoY. Metahelix’s performance was below expectation due to cotton seed’s price capping. Driven by operating leverage, consolidated EBITDA margin was stable and PAT rose 21% YoY. Though the performance this quarter partially abates our concern on Rallis’ market share loss, we prefer to monitor performance in ensuing quarters to change our view. Also, the deteriorating product mix (increasing share of generics) increases raw material price rise risks.
Factoring this, we cut our target multiple to 15x (from 18x). Maintain ‘HOLD’ with TP of INR207 (INR248 earlier).
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