Prabhudas Lilladher's research report on Rallis India
We trim our FY24/25E EPS estimates by 5%2% and downgrade the rating to ‘REDUCE’ (Earlier HOLD) citing 1) slower revenue growth and margin pressure amid delayed uneven distribution of rainfall (till date) and 2) increasing El-nino concerns in 2H of the monsoon season. Rallis India’s (RALI) 1QFY24 results were better than our and consensus expectations primarily led by better margins. The company highlighted that (a) domestic crop protection (CP) revenue declined by 5% YoY, (b) export revenues were down by 30% YoY, (c) seed revenues were down 2% YoY to Rs2.6bn, (d) gross margins expanded by 260bps YoY to 38.5% led by better product mix, e) EBITDA margins up 100bps YoY to 14.1%, led by lower RM cost and better cost efficiencies, (f) launched 3 insecticides in CP segment and (g) CRAMS gained traction plus PEKK shipments commenced (volumes to pick-up gradually).
Outlook
Citing near term headwinds we downgrade our rating to ‘REDUCE’ (Earlier HOLD) with revised TP of Rs 180 from Rs200 earlier based on 16xFY25 EPS (earlier 18XFY25 EPS).
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