Hold Rallis India; target of Rs 275: Prabhudas Lilladher

Prabhudas Lilladher's research report on Rallis India

In our recent interaction with management of RALI, they reiterated their strategy of both, capacity & portfolio expansion driven growth. Capacity is being enhanced in both domestic (formulation) and international (MPP, pendimethalin, intermediates, etc) crop protection segment. Similarly, portfolio is being enhanced by way of new product introduction, expanding crop portfolio, eyeing more co-marketing tie-ups, introducing new AIs, etc. The current focus seems to be more on topline growth rather than catapulting EBITDA margins to industry average of 17-20%. We estimate topline/ EBITDA/ APAT CAGR of 8%/21%/20% between FY20-23E.

Outlook

We are assigning target P/E multiple of 20x given ample levers for structural topline growth. Margins may continue to be volatile given the commodity nature of RALI’s key molecules. Maintain HOLD with target price of Rs 275 (Unchanged) based on 20x Sep’22 EPS of Rs 13.7.