Prabhudas Lilladher has given Hold recommendation for Rallis India with a target price of Rs. 260 in its research report issued on Apr 23, 2022
Prabhudas Lilladher’s research report on Rallis India
Rallis India (RALI) 4QFY22 results were lower than our and consensus expectations primarily led by miss on margins front. Despite revenue growth being in-line with our/cons estimates, RM cost headwinds during the quarter dented overall performance. Key highlights are: 1) domestic revenue grew 25% YoY led by both price and volume growth of 13%/12% YoY respectively (FY22 +14% YoY); while crop care segment was up 8% YoY (FY22 +11% YoY), 2) export revenues were down 8% YoY (FY22 +6% YoY), 3) seeds revenue remained flat YoY (FY22 -13% YoY), 4) pricing and volume pressure in metribuzin eased out, 5) there was pressure on margins, largely led by inflated RM cost and inability to fully pass on the cost, 6) launched 19 new products in FY22- 2 fungicides; 4 herbicides; 1 insecticide; 2 water soluble fertilizers; 3 bio pesticides, 1 organic manure and 6 hybrid seeds respectively and 7) ITI for FY22 stood at 11% (12% in FY21).
Going forward, we believe headwinds related to supply chain and availability of certain intermediates will likely continue in subsequent quarter. Though RALI took price hikes in recent past however it was not sufficient to mitigate entire cost inflation, hence more such hikes are possible in the near term too. Citing above reasons, we trim our estimates for FY23/24 by 8%/4% respectively. We expect RALI to clock revenue/PAT CAGR of 11%/9% over FY21-FY24E, led by domestic market share gain and export ramp-up. Maintain HOLD rating on the stock with revised TP of Rs260 based on 18xFY24 EPS.