Rallis India's results were disappointing due to lost sales from COVID (RS 692 mn), forex loss (Rs 99 mn) and other one-off items. Impact on the international business was more than domestic. Lockdown has impacted the operations but there is gradual improvement every passing day in limping back to normalcy. Plants are operating at low utilization; hence the company is giving priority to domestic business over international before the onset of peak season in Kharif. Despite weak results and near term blip in business due to COVID, outlook on Rallis remains robust. Domestic business growth will be driven by new launches, addition of new trade partners, relaxation in credit policies, commencement of new capacity and rosy outlook for the domestic agchem industry. International business growth will be driven by capacity creation for Metribuzin (Phase 2).
OutlookWe have marginally revised our EBITDA/PAT estimates downwards for FY21E by 4.6%/1.1% and for FY22E by 5.1%/3.3% but increase our target multiple from 17x to 18x. Maintain Accumulate rating with revised target price of Rs 246 (Previous- 240).
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