Prabhudas Lilladher's research report on Rallis India
Rallis India (RALI) 2QFY23 results were ahead of our/cons expectations primarily led by superior revenue growth across business segments. Gross margins contraction of 190bps YoY was largely led by high cost inventory coupled with inability to fully pass on the inflated cost. Key highlights are: (a) domestic revenue grew 18% YoY largely led by better realizations ; while overall crop care segment was up 31% YoY; (b) export revenues were up 67% YoY led by both prices and volumes; (c) seeds revenue were up 12% YoY;Rs120mn/Rs250mn provisions included in 2QFY23/1HFY23 respectively; (d)gross margins continues to be under pressure down 190bps YoY;while lower opex restricted EBITDA margins expansion by 30bps YoY to 12.4%; (e) launched 2/3 new products under 9(3) and 9(4) respectively in 1HFY23 and (f) CRAMS gaining traction; PEKK to revive by end of FY23. Going forward, management remained hopeful on the upcoming rabi season backed by better agronomic situation in the domestic markets. However, they remained cautious on the realizations going forward amid a falling RM cost scenario. While on the exports business with enhanced capacities coupled with favorable base and robust demand is likely to support growth in the near term. We trim our EPS estimates by 7%/2% for FY23/24E citing margin pressure.
Outlook
We expect RALI to clock revenue/PAT CAGR of 15%/18% over FY22-FY25E, led by domestic market share gain and export ramp-up. Maintain BUY rating on the stock with unchanged TP of Rs250 based on 18xFY25 EPS.
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