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Rallis India Limited Overweight
RALL.BO, RALI IN
Q1FY12: Seeds business/new products drive betterthan-
expected earnings
Rallis reported strong 1Q profit growth, driven by better-than-expected
performance of seeds business and launch of new products. Outlook remains
buoyant as new Dahej plant and seeds business ramp up over the course of
the year. Remain OW with a revised PT of Rs185.
Monsoon satisfactory so far. Rallis standalone business reported growth of
18% buoyed by a normal monsoon and launch of three new products. Rallis
management noted that although the monsoon progressed slowly initially, it
has picked up over the last fortnight. Management seems satisfied with the
monsoon so far and is confident about the off-take for pesticides for the rest
of the season.
Seeds business ramping up. Management noted that newly acquired seeds
business reported better-than-expected Q1 revenues (seasonally strong Q for
seeds). Seeds business is continuing to ramp as RALI aligns their manpower
and distribution network with that of Metahelix. Management indicated that
seeds business could grow significantly faster once they receive approvals
for Bt cotton seed.
Dahej commences production at end of 1Q. Currently, the new plant at
Dahej is producing pesticides for Rallis. Management indicated that they are
currently in the process of getting the requisite approvals for contract
manufacturing from Dahej plant and capacity would be ramped over the
course of FY12. They expect the Dahej plant to operate at close to peak
capacity from FY13 onwards.
Q1FY12 result highlights, change in estimates. Revenues increased 49%
YoY driven by the Metahelix acquisition (up 19% YoY on a like-to-like
basis). EBITDA margins (ex Metahlix) improved 190bps on account of
lower raw material costs. We raise our revenue estimates by 7%/6% for
FY12/FY13 on account of higher-than-expected seeds revenues. We change
our EPS estimates by -3%/+2% for FY12/FY13 to factor in higher interest
costs (for debt taken to acquire Metahelix) and minority interest
adjustment. Maintain OW rating and roll forward our PT to Mar-12 (Sep-11
previously), now at Rs185, based on 16x FY13E P/E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Rallis India Limited Overweight
RALL.BO, RALI IN
Q1FY12: Seeds business/new products drive betterthan-
expected earnings
Rallis reported strong 1Q profit growth, driven by better-than-expected
performance of seeds business and launch of new products. Outlook remains
buoyant as new Dahej plant and seeds business ramp up over the course of
the year. Remain OW with a revised PT of Rs185.
Monsoon satisfactory so far. Rallis standalone business reported growth of
18% buoyed by a normal monsoon and launch of three new products. Rallis
management noted that although the monsoon progressed slowly initially, it
has picked up over the last fortnight. Management seems satisfied with the
monsoon so far and is confident about the off-take for pesticides for the rest
of the season.
Seeds business ramping up. Management noted that newly acquired seeds
business reported better-than-expected Q1 revenues (seasonally strong Q for
seeds). Seeds business is continuing to ramp as RALI aligns their manpower
and distribution network with that of Metahelix. Management indicated that
seeds business could grow significantly faster once they receive approvals
for Bt cotton seed.
Dahej commences production at end of 1Q. Currently, the new plant at
Dahej is producing pesticides for Rallis. Management indicated that they are
currently in the process of getting the requisite approvals for contract
manufacturing from Dahej plant and capacity would be ramped over the
course of FY12. They expect the Dahej plant to operate at close to peak
capacity from FY13 onwards.
Q1FY12 result highlights, change in estimates. Revenues increased 49%
YoY driven by the Metahelix acquisition (up 19% YoY on a like-to-like
basis). EBITDA margins (ex Metahlix) improved 190bps on account of
lower raw material costs. We raise our revenue estimates by 7%/6% for
FY12/FY13 on account of higher-than-expected seeds revenues. We change
our EPS estimates by -3%/+2% for FY12/FY13 to factor in higher interest
costs (for debt taken to acquire Metahelix) and minority interest
adjustment. Maintain OW rating and roll forward our PT to Mar-12 (Sep-11
previously), now at Rs185, based on 16x FY13E P/E.
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