Prabhudas Lilladher has given Buy recommendation for Rallis India with a target price of Rs. 321 in its research report issued on Apr 23, 2021
Prabhudas Lilladher’s research report on Rallis India
RALI’s 4QFY21 result outperformance vis-à-vis our estimates was driven by higher than anticipated international business revenue (up 73% YoY). Deteriorating sales mix in favour of Metribuzin led to 210bps contraction in blended gross margins @ 41.4% (PLe 43%). Ex off-Metribuzin, international business is on a firm footing with volume growth in all molecules. Domestic business performance is also on expected lines with 14% revenue growth. We expect margin pressure to peak out in a quarter or so, as low Metribuzin price will be in their base Q2’22 onwards. Further, Dahej formulation facility and MPP to commence in 1H and 2H respectively are expected to drive growth with new launches in short to medium term. We believe, company’s target of expanding retail channel presence by 35% to 65000 retailers in FY22 will provide a wider footprint to explore growth opportunities. The management also plans to increase revenue mix of international business from 37% (FY21) to 40% by FY25. Its strategy of capacity expansion driven growth continues and we maintain our positive bias from a long term point of view.
We have upgraded our topline/EBITDA by 2%/4% for FY22E and 2%/2% for FY23E. Maintain Buy with TP of Rs 321 (TP unchanged) based on 20x FY23 EPS of Rs 16.0 (currently trades @ 17.2x FY23 EPS).