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Company said sales were impacted due to many small factors like sub optimal monsoon
distribution, product ban and lower acreage in bajra (for seeds). Product launches continue and
Rallis brand strength remains high. 2H outlook is better, and debtors should also decline.
Sales growth impacted by monsoon distribution, other factors
Management said that pesticide sales would have been higher but for uneven rainfall
distribution especially at critical period in July.
In some crops like rice and cotton, continuous rains meant lesser sprayings, use of cheaper
pesticides, and less fungal diseases.
Endosulfan ban also shaved off approx 200bps of growth.
Metahelix sales impacted by 20% drop in bajra acreage (a key crop).
Company continues to focus on building brand power
Company provided examples of 4 significant brands which carry 15-30% price premium over
nearest competitor.
Launched 9 new products in 1H, 6 in 2Q- highest number of launches in any quarter.
1 product has been licensed from Syngenta, and is one of the largest selling fungicides in the
world.
Company conceded that they might not grow as fast as some others, but will retain focus on
building a strong brand portfolio.
2H to be better
Interest and depreciation costs on Dahej impacted 2Q profits, but they will get absorbed over
remaining part of the year as Dahej will likely operate at 100% by year end.
Debtors should decline in 2H but not to earlier levels. They rose in 2Q due to a mix of
seasonal factors and push for higher growth.
Company plans to be a leader in seeds business in 3-5 years. It has an exciting pipeline in
rice, cotton, corn and 4 vegetables which will be the growth drivers.
Our view
We retain our Buy recommendation and price target of Rs210. Stock remains a high quality
play long term on rising pesticide and seed consumption in India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Company said sales were impacted due to many small factors like sub optimal monsoon
distribution, product ban and lower acreage in bajra (for seeds). Product launches continue and
Rallis brand strength remains high. 2H outlook is better, and debtors should also decline.
Sales growth impacted by monsoon distribution, other factors
Management said that pesticide sales would have been higher but for uneven rainfall
distribution especially at critical period in July.
In some crops like rice and cotton, continuous rains meant lesser sprayings, use of cheaper
pesticides, and less fungal diseases.
Endosulfan ban also shaved off approx 200bps of growth.
Metahelix sales impacted by 20% drop in bajra acreage (a key crop).
Company continues to focus on building brand power
Company provided examples of 4 significant brands which carry 15-30% price premium over
nearest competitor.
Launched 9 new products in 1H, 6 in 2Q- highest number of launches in any quarter.
1 product has been licensed from Syngenta, and is one of the largest selling fungicides in the
world.
Company conceded that they might not grow as fast as some others, but will retain focus on
building a strong brand portfolio.
2H to be better
Interest and depreciation costs on Dahej impacted 2Q profits, but they will get absorbed over
remaining part of the year as Dahej will likely operate at 100% by year end.
Debtors should decline in 2H but not to earlier levels. They rose in 2Q due to a mix of
seasonal factors and push for higher growth.
Company plans to be a leader in seeds business in 3-5 years. It has an exciting pipeline in
rice, cotton, corn and 4 vegetables which will be the growth drivers.
Our view
We retain our Buy recommendation and price target of Rs210. Stock remains a high quality
play long term on rising pesticide and seed consumption in India.
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