India Equity Research: rallis

Rallis India Target - | 302
• Rallis India, a Tata enterprise, is a major crop protection (agro
chemicals) player domestically with presence across the
agricultural value chain including hybrid seeds (through its
subsidiary Metahelix), plant growth nutrients and organic manure
& soil conditioners. In FY10-14, sales and PAT recorded a CAGR of
18.4% and 10.6%, to | 1727 crore and | 152 crore, respectively
• Rallis also has a notable presence in the contract manufacturing
segment wherein it manufactures chemicals and formulations for
other reputed industry players. It is developing its new Dahej SEZ
unit for the purpose of contract manufacturing and clocked a
topline of ~| 250 crore from this segment in FY14. The company
also possesses good brand recall and enhanced farmer reach. Its
distribution network comprises 2,000 dealers and 30,000 retailers.
Rallis is also de-risking its business profile through increasing
share of non-pesticide portfolio in the total product mix
• Rallis has a lean balance sheet with minimal leverage and strong
return ratios with FY14 RoCE & RoE at 21% & 28%, respectively.
The company also possesses relatively better working capital
cycle with net working capital days at 23 days in FY14 vis-à-vis
industry average of ~44 days. We expect sales and PAT to grow
at a CAGR of 16.8% and 21.6%, respectively, in FY14-17E. We
have valued the company at 24x P/E on an average FY16E and
FY17E EPS of | 12.6 and arrived at a target price of | 302 with a
long term (18-24 months) investment horizon

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08 May 2013

Rallis India- In‐line results; maintain ‘Accumulate’::Prabhudas Lilladher,

Rallis India reported Q4FY13 results broadly in line with expectations. Adjusted PAT
for the quarter stood at Rs105m, 253% YoY, driven by better rabi season & lower
base. Working Capital requirements also reduced to Rs1.8bn compared to Rs2.2bn
at the end of H1FY13. We believe Rallis will continue to benefit from its leadership
position in domestic agrochemicals market, strong product pipeline in Metahelix
and ramp‐up in Dahej. Stock is currently trading at 15.7x FY14E earnings (long‐
term average of 18x based on 1‐yr forward earnings). Maintain ‘Accumulate’ with
TP of Rs140.
! Q4FY13 results were broadly in line: Rallis reported consolidated sales of
Rs2.9bn, 32% YoY (against an est. of Rs2.5bn). Standalone sales stood at
Rs2.6bn, 33% YoY, while Metahelix sales stood at Rs196m, 18% YoY. However,
consolidated margins at 9.9% were lower than estimate of 11.7%. EBITDA for
the quarter stood at Rs282m, 128% YoY, in line with estimates. Adj. PAT for the
quarter stood at Rs105m, 253% YoY (low base effect) in line with estimates.
! New product launches, ramp‐up in Dahej & strong product pipeline of
Metahelix to drive growth: We expect domestic agrochemicals industry to
rebound over the next year and Rallis being one of the leading players is
expected to be a major beneficiary. Consistent launch of new products & rampup
in Dahej would further spur growth. Metahelix has a strong product portfolio
across corn, millets, paddy and vegetable seeds and is well-positioned to
achieve 25% p.a. growth over the medium-term.
! Maintain ‘Accumulate’ with target price of Rs140: Rallis is currently trading at
15.7x FY14E earnings of Rs7.8 (long-term average of 18x based on 1-yr forward
earnings). Rallis continues to trade at a premium of 25-30% to domestic peers
which, we believe, will continue over the medium term. We value Rallis at 18x
FY14E earnings, resulting in target price of Rs140 (potential upside of 14%) and
recommend ‘Accumulate’.

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16 July 2012

Rallis India: Target Price: ` 144 Reduce: Dolat Cap

Key takeaways from the annual report
Domestic Agrochem industry witnessed a deceleration in FY12 and Rallis
was no exception to this trend (domestic pesticides sales down 3.3%
YoY). During the year, the company opted to focus on cash generation
(reflected in prudent working capital management) over revenue growth.
Also, the company discontinued red triangle products from the portfolio
(10% of sales in FY11) which further weighed on topline growth. The
downtrend was restricted by healthy growth in exports (up 49.5% YoY).
We anticipate the ramp-up in Dahej facility to catapult export growth.
Over the years, Rallis aims to expand its product offerings and scale up
its newly added adjacent businesses (Metahelix Lifesciences and Zero
Waste Agro Organics). The company is on course to transform itself from
a mere agrochem company to a complete agri-service provider.

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13 May 2012

Sizzling Stocks: Indian Bank ,Rallis India :: Business Line,

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Sizzling Stocks: Indian Bank (Rs 179.6)

The stock was in a medium-term downtrend, in place since this February peak of Rs 253. This trend accelerated last week and the stock slumped 8.5 per cent on Friday following its disappointing fourth quarter numbers.

For the week, the stock has tumbled 14 per cent with good volumes. But it is testing a key long-term support band between Rs 170 and Rs 180. Its daily indicators and oscillators are hovering in the oversold territory. The stock has breached the daily Bollinger bands' lower boundary implying oversold.

An upward reversal from the aforesaid support band can push the stock higher to Rs 195 and to Rs 210 in the short-term. A strong rally above Rs 225 is needed to alter its downtrend and take the stock higher to Rs 245.

On the other hand, an emphatic breakthrough of the Rs 170 support will strengthen the stock's downtrend and pave the way for a medium-term decline to Rs 154 and then to Rs 142.

Rallis India (Rs 124.9)

The stock gained 10.5 per cent in the previous week. It is currently testing its intermediate-term down trendline that has been in place from October 2011 peak of Rs 185 and a key resistance around Rs 130. Breach of this resistance will take the stock higher to Rs 140 which is a significant long-term resistance.

Next important resistances are positioned at Rs 150 and Rs 160. Only a conclusive breakthrough of Rs 160 will alter the downtrend and push the stock northwards to

Rs 180. The inability to surpass the resistance level of Rs 140 will confine the stock to trading broadly between Rs 115 and Rs 140. However, a fall below Rs 115 can drag the stock lower to Rs 103. Subsequent support for the stock is at Rs 94.

30 April 2012

Rallis India Limited- Q4FY12 Result updates BY GEPL CAPITAL Pdf Link

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Rallis India Limited

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27 April 2012

Rallis India Limited :Buy rating with a revised target of Rs150.17- GEPL PDF link

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Summary

At the CMP of `115.95, Rallis India is trading at 11.50x its FY13E earnings estimate. Currently, the sector is facing headwinds such as lower farmer sentiment and considerable inventory pileup putting pressure on margins. However, strong base business, continuous product launches and foray into newer segments lead us to believe the long term outlook for Rallis is still positive. Being an agricultural stock, rainfall is a crucial trigger for the stock.

We retain our BUY rating on Rallis with revised target price set to `150.17 based on a P/E of 15x FY13E EPS of `10, a potential upside of 29.52%.

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Angel Broking -Rallis India - RU4QFY2012 -Result Updates - PDF link

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Rallis India - RU4QFY2012

07 March 2012

Rallis India Limited - Expansion to steer growth:: GEPL PDF link

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Summary

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a) New Dahej facility to spruce up international sales; reduce domestic market dependence.

b) Metahelix acquisition to help company grab a bigger pie in the lucrative seeds market.

c) Consistent product launches and continued emphasis on R&D to keep "innovation turnover index high".

d) Numerous initiatives and customer engagement programs to help company retain its top of the mind status.

At CMP of Rs123, Rallis is trading at 17x its FY12E EPS and 12x its FY13E EPS, which is close to its average historical one year forward P/E. As compared to its listed domestic peers, Rallis commands a rich premium of close to 30%. We expect Rallis to continue to command premium due to its consistent product launches, ramp up in capacity at Dahej facility and improvement in performance of Metahelix.

We initiate coverage on the stock with a BUY rating and a target price of Rs153 per share based on a P/E of 15x FY13E EPS of Rs10.20, implying a potential upside of 25%.

12 February 2012

BUY Rallis India: Target 168::Anand Rathi

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CMP 136 BUY Target 168
Investment Arguments
~ Industry Outlook
~ Strong capital management
~ Strong brands, innovative products and deep distribution
driving market share gains in the domestic market
~ Higher productivity, scarce labor driving demand
~ Valuation
Company Description
Rallis India Limited, an agrochemical company, engages in the
manufacture and sale of pesticides, plant growth nutrients, and
seeds in India and internationally. It offers insecticides, fungicides,
and herbicides; cereals and fiber crops, hybrid varieties of maize
and paddy, and cotton; fertilizers; and seed treatment chemicals, as
well as household products, including Termex termiticide, Sentry
synthetic pyrethroid insecticide, and Ralli cockroach control gel.
The company also provides technical and bulk of various molecules
to agrochemical manufacturers; and contract manufacturing
services for technical grades/formulations and intermediaries. It
sells its products through dealers and retailers.
Rallis India Limited operates as a subsidiary of Tata Chemicals
Limited, which holds a 51.04% Stake in the company. Rallis India
has 7 of the top 12 brands in the country. Top 3 brands of
Company by revenue contributed close to 250 Crore in total sales
of FY 10-11. The company has 6 factories located across the
country including Dahej SEZ plant which commissioned this year.
Rallis has a very strong distribution network covering 80% of India’s
districts, and more than 1500 dealers and 30,000 retailers across
India.
Rallis has recently added manufacturing capacities by setting up a
new plant in Dahej (annual capacity of 5000MT). This plant has
been set up in a special economic zone (SEZ) and will mainly cater
to international markets. Rallis is seeing strong enquiries from
customers for contract manufacturing. We expect this plant to scale
up over the next 1-2 years and drive strong growth for the
international business. Rallis should also benefit from excise and
tax savings, given that the plant is located in a SEZ. The Dahej
plant would be exempted from income tax and excise duties for the
first 5 years of operations.

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28 January 2012

Fund Managers Meet Update Rallis India ::Emkay

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Fund Managers Meet Update

Rallis India

Reco: HOLD

CMP: Rs 123

Target Price: Rs 120

Domestic growth under pressure, maintain HOLD

Key highlights from Rallis Fund managers’ meet -

· Domestic business was negatively impacted in Q3 due to erratic nature of North Eastern monsoon. Agri-input consumption was also impacted due to pressure on farmer profitability

· FX loss of Rs 82mn related to the MTM loss on exchange rate fluctuations on import of raw materials.

· Dahej plant remains on track and achieved 75% capacity utilization during Q3. While growth in Q3 was led by exports, domestic business is under pressure

· Management sounded cautious on rabi outlook and future expectations are built from a favorable monsoon. We maintain HOLD with target price of Rs 120

08 January 2012

Rallis India - Domestic market under pressure - Downgrade to HOLD::Emkay

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¾ Rallis’ higher dependency on domestic agrochem markets
(70% of revenues) will lead to moderation in earnings in near
term due to declining farm incomes & shrinking farm
profitability
¾ During FY08-11, Rallis witnessed revenue / PAT CAGR of 17%/
43%, respectively. However near term growth to moderate at
Revenue / PAT CAGR of 21% / 15% during FY11-13E
¾ Potential ramp up in recently acquired seed business coupled
with Dahej plant (catering to exports) is likely to contribute
to revenue growth in long term
¾ Downgrade FY12/13E EPS estimates by 12.8%/22% to Rs 7/8.5
and lower target multiple to 14x from 18x. Downgrade to Hold
from BUY with target price of Rs 120 (previous Rs 197)
Higher dependency on domestic markets might lead to moderation in
earnings in the short term
Rallis is largely domestic agrochemical focus company with revenue contribution of
~70% from domestic markets and balance from exports. Higher agrochemical
consumption with growing preference for branded products has helped Rallis to report
revenue CAGR (FY08-11) of 17% while improved product portfolio driving EBITDA
margins resulted into PAT CAGR of 43%. We believe pressure on farmers’ profitability
is likely to squeeze affordability for agrochemicals and put pressure on company’s
earnings in the near future.
Ramp up of seed business and Dahej plant to support long term growth
Acquisition of seed company - Metahelix has helped Rallis to capture the opportunity in
fast growing seeds market. Rallis is confident of boosting its revenues from Metahelix
from Rs ~1 bn at present to Rs 4-5 bn over next 3-4 years on back of its strong brand
equity and distribution network. Company’s Dahej plant (largely to cater exports market)
was commissioned in Q1FY12 and it is currently operating at 40-50% capacity
utilization. Planned ramp up at Dahej plant to 100% by end of FY13 is also likely to
support revenue growth for the company.
Reduce earnings and target price, downgrade to HOLD
Due to increasing pressure on domestic farm incomes and shrinking farm profitability,
we have cut our FY12/13 EPS estimates by 12.8%/22% to Rs 7.0/8.5, respectively in
anticipation of increasing pressure on margins and growth in near term. Rallis witnessed
significant re-rating in FY11 to P/E of 14x from 8 x in FY08-10 driven by higher earnings
growth and improved return ratios (RoE 27%). However with recent moderation in
earnings we have trimmed our target multiple to 14x from 18x. Subsequently we reduce
our target price from Rs 197 to Rs 120 and downgrade the stock from BUY to HOLD.

19 November 2011

Rallis India - 2QFY2012 Result Update:: Angel Broking

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For 2QFY2012, Rallis India (RAIL) reported 18.4% growth in its net sales.
However, net profit growth came in almost flat. We expect RAIL to register a
CAGR of 20% and 23% in its net sales and profit over FY2011-13, respectively.
We remain Neutral on the stock.
Robust growth on the sales front: RAIL’s revenue for the quarter grew by 18.4%
yoy to `430cr. Exports growth came in at 25% yoy and domestic sales stood at
12% yoy. However, the company witnessed a significant erosion of 292bp yoy in
its gross margin to 39.0%. Further, staff cost grew by 19.9% yoy. Consequently,
OPM declined by 250bp yoy to 20.5% and EBITDA grew only by 5.5% yoy. This
resulted in flat growth in net profit to `58.7cr.
Outlook and valuation: Management is confident about the prospects for the
agrochemicals industry. The company expects to outperform the industry, given its
product pipeline. Overall, we expect RAIL to register a CAGR of 20% and 23% in
its net sales and profit over FY2011-13, respectively. At current levels, the stock is
trading at fair valuations of 17.3x FY2013E EPS. Hence, we maintain our Neutral
recommendation on the stock.

11 November 2011

Rallis India -- Weak 2Q: Expect a 2H Recovery. Cut PT to Rs180 :JPMorgan,

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RALI reported weak 2Q results, with net profit flat YoY. Seed business delivered
below expectations in a seasonally weak 2Q. Pesticides off-take also slowed as
good monsoons led to lower incidence of pest attack. On the positive side, Dahej
is ramping up well and is expected to achieve full utilization by Jan '12. Working
capital levels have increased as exports from Dahej entail higher inventories and
receivables. We cut our estimates and reduce PT to Rs180.
 Pesticides, seeds growth fare below expectations. According to management,
good South-West monsoon resulted in lower occurrence of pests, which
adversely impacted off-take of pesticides in 2Q. Management expects a good
rabi (winter) crop season, which should drive a pickup for pesticides in 2H.
Metahelix seeds business was weaker than expected and reported loss of
Rs47MM, as acreage under millets (key product for Metahelix) declined.
 Dahej plant ramping up well. After initial delays, Dahej plant is now fully
operational and management expects it to reach full capacity by Jan-12. As per
management, there is good interest from global customers, and 3-4 new
contracts are likely to be signed over next 6 months.
 Increasing debt, working capital. Net gearing increased marginally from 0.2x
at Mar-11 to 0.26x in Sep-11 as RALI increased its stake in Metahalix from
60% to 73%. Receivables in 2Q increased to 50 days (from 35 days), which will
continue going forward as exports from Dahej ramp up. However, compared to
peers, overall operating cycle for RALI still remains best in class
 Q2 result highlights: Revenues increased 18% YoY driven by launch of 9 new
products. EBITDA margins declined 160bps YoY due to higher raw material
costs (+290bps), EBITDA grew 10% YoY. Net profits came in flat YoY, pared
by higher interest cost and depreciation on commissioning of the Dahej plant.
 Maintain Overweight. We cut FY12/13E EPS estimates by 12%/10%,
factoring in weak 2Q and higher interest and depreciation. We lower our Sep-12
PT to Rs180 (from Rs185), based on 16x Sep-13E P/E. RALI has outperformed
the Sensex by 30% YTD. We believe RALI needs to demonstrate ramp up of its
seeds operations and deliver on guidance for Dahej to sustain the re-rating.
Strong domestic market positioning and balance sheet strength should help
sustain premium valuations v/s peers. Key risks include further slowdown in
pesticides, inability to scale up seeds business and miss in guidance for Dahej.