Rakesh Jhunjhunwala portfolio stock Rallis India has been under the grip of bears for quite some time now as the stock has given zero return in the last one year. Rallis India shares have plunged 15% in the past 12 months and over 12% so far in 2022. Despite the stock remaining in the consolidation zone so far this year, brokerages remain bullish on the stock and see up to 32% potential rally going forward. While Rakesh Jhunjhunwala held 1.38 crore Rallis India shares (7.14% stake), his wife Rekha Jjhunjhunwala held 51.8 lakh shares of the company till quarter ended March 2022. The Jhunjhunwalas collectively hold 9.8% stake in Rallis India.
Additional capacities, new product registrations to aid growth in the international business
The company launched 13 new products in FY22, including 6 crop nutrition products, and has plans to launch at least two products (Insecticides/Pesticides) every year to sustain growth in the domestic crop protection market, as per management. “Additional capacities and new product registrations should aid growth in the international business,” said Emkay Global in its note. The brokerage firm has a ‘buy’ call on the stock with a target price of Rs 275.
Valuations are reasonable
Analysts at IIFL Securities tweaked FY23/24 EPS estimates by 15-22% post the weak 4QFY22 results and pressure on margins. Rallis India’s Q4 earnings missed their estimate amid challenging times. Results were affected by unavailability of raw material, rising input costs and provision on high seed inventory. “Management’s focus on prioritising capacity utilisation vs profitability may keep margins subdued, unless the company is able to pass on these rising costs. Our continued positive bias on the stock remains predicated on an expectation of scale-up in the exports business, comprising CRAMS as well as catalog sales. Valuations are reasonable,” the brokerage said. It retained its recommendation at ‘buy’ with a target price of 295 per share.
Export market share gains, ongoing capex plans to support long-term growth, shares may rally 32%
Brokerage firm Anand Rathi Share and Stock Brokers in its report highlighted that non-availability of key raw materials, higher input prices and declining international business growth hurt Rallis Q4 and annual performance. “Key short-term challenges are rising input costs, softer contract manufacturing demand and challenges in its seeds business, but its product-launch focus, rising share of its herbicide range, export market share gains and ongoing capex plans would support long-term growth,” it said.
Rallis India’s management has guided for a capex of Rs 250 crore in FY23. One of the leading companies in domestic agrochemicals, Rallis has strengthened its position over the years and now holds a 6% market-share each in crop protection and plant-growth nutrients, and 3% in seeds,” the brokerage added. It also maintained ‘buy rating’ on the stock with a target price of Rs 320, implying up to 32% potential rally in 12 months.
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