Hold Rallis India; target of Rs 223: Edelweiss

Edelweiss' research report on Rallis India

Rallis India’s (Rallis) Q2FY18 consol revenue of INR5.9bn (adjusted for GST) was up 9% YoY, but below our 15% growth estimate. Standalone revenue of INR5.5bn grew 11% YoY, driven by double-digit growth in both domestic and export segments. However, Metahelix saw 13% YoY fall in revenue to INR393mn due to higher than expected sale returns. Consol EBITDA margins, however, improved by 150bps led by benefits of operating leverage and lower losses in Metahelix. Rallis also launched 3 products this quarter. With the expected GST-led restocking not happening, we lower our revenue growth estimate and consequently trim our FY18/19E EPS by 5%/4%. We continue to value Rallis at 18.0x FY19E EPS, giving us a target price of INR223. We maintain ‘HOLD’.

Outlook

While management mentioned previous quarter was an aberration primarily due to GST, growth in Q2FY18 came below expectation. To reflect same, we adjust our FY18E revenue growth to 9% (15% earlier), which leads to 5%/4% cut in FY18/19E EPS. We continue to value Rallis at 18.0x FY19E EPS, giving us a target price of INR223. We maintain ‘HOLD’

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