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21 September 2011

Rallis India Ltd - BUY:: Target : `185.00:: SMC

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The company has recently commissioned its Dahej unit at a capex of `150 crore operating
with an annual capacity of 5,000 tonne. The plant will primarily cater to export markets,
increasing the share of international business in the overall revenues to nearly 35%. This
new capacity will bring an average of 100 crore of revenue every year for the next five
years.
Company has several new products under development and has plans to improve
existing products in order to cut their costs and become competitive in the market.
INVESTMENT ARGUMENTS
·The company has recently commissioned its Dahej unit at a capex of `150 crore operating
with an annual capacity of 5,000 tonne. The plant will primarily cater to export markets,
increasing the share of international business in the overall revenues to nearly 35%. This
new capacity will bring an average of 100 crore of revenue every year for the next five
years. The company entered into the seeds business - another key growth area essential
for boosting the farm productivity - through an acquisition.
·The significance of agriculture is rising the world over as growing population and
changing demographics are raising demand for food grains, while the limited
availability of land is a key constraint. In this scenario, demand for the crop protection
industry is growing strong to improve farm productivity. The trend, which visibly
benefited Rallis in the past few years, is set to continue in foreseeable future as well.
·High growth in sales was aided by steady progress of July monsoon which enabled
improvement of sowing and crop acreage in cotton, groundnut and pulses meanwhile
domestic business performance was further enhanced by successful product launches in
both the crop protection and seeds space. International Business recorded improved
performance reflecting positive global trends.
·Of the six product launches planned in 2011-12, the company has already introduced
three in the domestic formulations business-insecticides Neon and Sonic, and herbicide
Vaar. These should help Rallis India ramp up its product portfolio in the herbicide space,
which is the fastest growing segment in the agrochemical industry. It has several new
products under development and has plans to improve existing products in order to cut
their costs and become competitive in the market.
·In the institutional business, the Company provides technical and bulk of range of
molecules to companies, such as Bayer, Syngenta, Excel, UPL, Ghards, Cheminova,
Dhanuka, Nagarjuna and other agrochemical manufacturer.

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