Analysts' corner

Rallis India, Bajaj Hindusthan & Everest Kanto Cylinder

RALLIS INDIA
Reco price: Rs 1,387;
Target price: NA
Rallis India (RAIL) reported disappointing numbers for 4QFY2011, although top-line growth was marginally below analysts’ expectations. Ebitda margin stood at 16 per cent due to high contribution from the company’s low-margin products. Net profit for the quarter declined by 20 per cent y-o-y. RAIL’s revenue for the quarter grew by 14.4 per cent to Rs 232 crore. However, Ebitda margin contracted by 510bp y-o-y to 16 per cent on account of change in product mix and unseasonal rains in South India. Unseasonal rains led to absence of pest occurrence, in turn negatively affecting demand for the company’s key products. East India witnessed less pest occurrence in key vegetables, which also affected the company’s overall sales. All this led to higher demand for low-margin products, thereby affecting the company’s overall Ebitda margin.

—Angel Broking

BAJAJ HINDUSTHAN
Reco price: Rs 76;
Target price: Rs 83
Bajaj Hindusthan Q2 and H1 F9/11 performance incorporates its erstwhile subsidiary Bajaj Hindusthan Sugar & Industries which renders y-o-y comparison difficult. At a generic level, average free sugar realisation declined 18 per cent y-o-y to Rs 28.8/kg while alcohol realisation increased two per cent y-o-y to Rs 27/BL; Reported net profit includes forex fluctuation on long-term monetary items without which net profit would have been lower by Rs 8 crore. The company has redeemed outstanding $100 million FCCBs in the quarter and paid out an aggregate $133 million, debt increased to Rs 5,900 crore in March 2011 from Rs 5,500 crore in September 2010. Maintain buy.

—IIFL

EVEREST KANTO CYLINDER
Current market price: Rs 85;
Fair value: Rs 93
CRISIL Equities lowers Everest Kanto Cylinder Ltd’s (Everest Kanto’s) fundamental grade to 3/5 indicating Rs good’ fundamentals. The revision is driven by increasing competition in the high pressure cylinder manufacturing business resulting in permanent margin contraction at the industry level and continued underperformance by Everest Kanto’s US and Chinese operations. 

—Crisil Equities