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Rallis India 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, Rallis India (RAIL) reported 18.6% growth in its net sales. However, net profit growth declined by almost 78% yoy. However, adjusted for the extra-ordinary the net profit declined by 23% yoy. The disappointment mainly came on the OPM front, which declined by almost by 10.4% on yoy. We expect RAIL to register a CAGR of 19.8% and 21.4% 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 18.6% yoy to Rs.318cr. Major growth for the company came in through the exports, while domestic business was flat. On the Operating front, the Gross margins came in flat at 40.6%, however there was a sharp dip in the OPM’s which declined by 10.4% yoy. This dip was on account of significant rsie in other expenditure, which resulted in sharp dip in the net profit.

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 19.8% and 21.4% in its net sales and profit over FY2011-13, respectively. At current levels, the stock is trading at fair valuations of 14.2x FY2013E EPS. Hence, we maintain our Neutral recommendation on the stock.