Rallis India hits 21-month high, zooms 47% in January on strong Q3 results

Analysts remain positive due to growth capex in exports, revitalizing domestic distribution, new product launches, and backward integration in Metribuzin.

Shares of Rallis India continued their northward march and rallied 7 per cent on Wednesday to hit 21-month high level of Rs 247 on the BSE. The stock of the Tata Group agrochemicals company was trading at its highest level since April 25, 2018.

Thus far in January, Rallis has zoomed 47 per cent after it delivered an all-round performance in Q3 on the back of a 35 per cent yoy growth in the domestic business. This is Rallis' best performance in the last six years, albeit on a low base.

The company’s profit before tax more-than-doubled at Rs 48 crore in December quarter (Q3FY20). It had PBT of Rs 20 crore in the same quarter last fiscal.

Rallis recorded consolidated revenues of Rs 534 crore in Q3FY20, a growth of 28 per cent over Rs 417 crore in previous year's quarter. Net profit jumped 177 per cent to Rs 38 crore from Rs 14 crore in the year-ago quarter.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) margin expanded by 380 basis points to 10.4 per cent. The correction in raw material prices supported EBITDA margin, primarily in domestic business.

The management said that during the current crop season, its business was supported by positive farmer sentiment, new product launches and refreshed trade policies. The metribuzin Phase II expansion of 500MTPA is expected to be commercialized by February 1, 2020, it said.

Analysts at Emkay Global Financial Services believe that Rallis' initiative to fill portfolio gaps coupled with new trade terms is paying off and should help it arrest market share decline. The brokerage firm remains positive on the company due to capex growth in exports, revitalizing domestic distribution, new product launches, and backward integration in Metribuzin.

“We expect a fall in key raw material prices along with better volume growth from key molecules to translate into an improvement in EBITDA margins in the medium term. Further, new product launches along with better distribution policy and penetration towards Rabi crop would protect domestic market revenues from vulnerability in medium term. This would translate into stability in earnings and, thereby, improvement in valuations,” analysts at ICICI Securities said in result update.

At 10:32 am, the stock was trading 4 per cent higher at Rs 240 on the BSE, as compared to 0.59 per cent rise in the S&P BSE Sensex. A combined 823,654 equity shares have changed hands on the counter on the NSE and BSE so far.