Recommendations » India

Rallis India 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Rallis India (RAIL)’s consolidated net sales grew by 7.0% yoy to Rs.340cr. The OPM for the quarter came out to 12.9%, ie a dip from 15.2% in 3QFY2012. The yoy dip in the OPM resulted in a 15.9% yoy decline in the company’s adjusted net profit to Rs.22cr. Going forward, we expect RAIL to register a CAGR of 15.0% and 20.3% in net sales and profit over FY2012-14, respectively. We remain Neutral on the stock.

OPM dips on yoy basis: RAIL’s revenue for the quarter grew by 7.0% yoy to Rs.340cr. On the operating front, the gross margin came in at 39.2%, down 164bp yoy. Consequently, there was a dip in the OPM, which declined to 12.9% in 3QFY2013 vs 15.2% in 3QFY2012. This resulted in a de-growth in the adjusted net profit by 15.9% yoy to Rs.22cr.

Outlook and valuation: The Management is confident about the long-term prospects of the agrochemicals industry. We expect RAIL to register a CAGR of 15.0% and 20.3% in net sales and profit over FY2012-14, respectively. At the current levels, the stock is trading at a fair valuation of 16.6x FY2014E EPS. Hence, we maintain our Neutral recommendation on the stock.