Prabhudas Lilladher has given Buy recommendation for Rallis India with a target price of Rs. 250 in its research report issued on Sep 22, 2022
Prabhudas Lilladher’s research report on Rallis India
RALI in their pre-quarterly conference call highlighted that (a) domestic crop care business likely to post subdued performance primarily led by tepid demand due to disproportionate rainfall resulting into lower pest infestation and miss in sprays; (b) exports at a better-off position led by improved demand scenario globally supported by better product and price mix, however have cautious outlook due to drought in US and European markets; (c) herbicides continues to outperform (to post double digit growth in 2Q) as compared to insecticides and fungicides category; (d) launched 3 new 9(3) molecules in 1HFY23 as against guidance of 4 product launches in FY23E, additionally launched 5 new 9(4) molecules in 1H’23; (e) crop nutrition business to post double digit revenue growth, aided by better product mix; (f) high cost inventory to exert pressure in near term, however remains confident to maintain absolute EBITDA led by recent price hikes. We expect revenue/PAT CAGR of 13%/18% over FY22-25E (vs 8%/3% over FY11-22). Retain ‘BUY’.
We retain ‘BUY’ on Rallis India (RALI) with a target price of Rs250 (Rs230 earlier) based on 18xFY25 EPS even as we reduce our EPS estimates by 5.5% and 4.9% for FY23/24E on near term margin pressures due to high cost raw material inventory in 2Q23 despite 4-5% price hike in June’22.