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Rallis India 2QFY2013 performance highlights and results update

Contributed by Angel Broking

For 2QFY2013, Rallis India (RAIL) reported a good set of numbers. The company's consolidated net sales grew by 11.2% yoy to '481cr. The OPM for the quarter came out to 19.1%, ie a dip from 22.5% in 2QFY2012. However, on the positive side, on a qoq basis, the OPM has expanded from a low of 10.2% in 1QFY2013. The yoy dip in the OPM resulted in a subdued 5.2% yoy growth in the company's adjusted net profit to ?62cr. Going forward, we expect RAIL to register a CAGR of 15.0% and 1 9.9% in its net sales and profit over FY2012-1 4, respectively. We remain Neutral on the stock.

OPM expands on qoq basis: RAIL's revenue for the quarter grew by 11.2% yoy to '481 cr. On the operating front, the gross margin came in at 35.5%, down 389bp yoy. However, there was a dip in the OPM, which declined to 19.1% in 2QFY2013 vs 22.5% in 2QFY2012. However, on a qoq basis, the OPM has expanded significantly from 10.2% in 1QFY2013. This resulted in a growth of 5.2% yoy in the adjusted net profit to '61.5cr.

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 19.9% in its net sales and profit over FY2012-14, respectively. At the current levels, the stock is trading at a fair valuation of 14.9x FY2014E EPS. Hence, we maintain our Neutral recommendation on the stock.