Rallis India sinks 8% after analysts cut earnings estimates post poor Q3

Rallis India share price plummeted 8.12 per cent at Rs 266.20 a piece on the BSE in Monday’s intraday trade. This came after the company reported a considerable drop in its profit for the third quarter of the financial year 2024-25 (Q3FY25). 

 

In Q3 FY25 Rallis India’s net profit fell to Rs 11 crore from Rs 24 crore year-on-year (Y-o-Y), a decrease of 54.17 per cent. Sequentially, the net profit dropped 88.78 per cent from Rs 98 crore.

 

The agrochemical company's revenue for Q3 also saw a Y-o-Y decline, falling to Rs 520 crore from Rs 560 crore, down 7.14 per cent. On a Q-o-Q basis, the revenue dropped from Rs 590 crore, showing a drop of 11.86 per cent.

 

Ebitda for the quarter decreased to Rs 44 crore from Rs 58 crore Y-o-Y in Q3, a decline of 24.14 per cent. The Ebitda margin contracted to 8.43 per cent from 10.37 per cent Y-o-Y.

 

The company’s results fell short of analysts expectations driven by the weak operating environment in both domestic and export businesses. 

 

Analysts noted that the company’s exports continue to be under strain, led by a volume dip of 34 per cent and a price drop of 4 per cent due to weak demand. A few of Rallis India’s molecules – Acephate and Pendimethalin – are seeing demand- and margin-strain, analysts at Elara Capital said in a note. 

 

On the upside, the company is in the final stages of commercialising a new active ingredient, Metalaxyl-M and the management is confident of its long-term potential, for both domestic and exports markets, analysts said.

 

Meanwhile, adverse weather conditions, adequate inventory, pricing pressure and lower prices for some crops such as chili dented demand for agrochemicals in the domestic markets in Q3. However, despite that its domestic volumes grew 2.5 per cent driven by biological and specialty solution business, up 13 per cent.

 

Those at Nuvama Institutional Equities stated overcapacities of agrochemicals in China coupled with persistent higher inventory of key products with customers affected volumes in the international business.

 

The brokerage gave a ‘Reduce’ call on the stock at Rs 179 per share, while cutting its FY25, FY26 and FY27 earning per share (EPS) estimates by 18.5 per cent, 15.0 per cent, and 14.2 per cent. 

 

Elara Capital also lowered its estimates owing to unsupportive business enviornment. The brokerage reduced its revenue, Ebitda, and PAT estimates by 8 per cent, 14 per cent, and 25 per cent for FY25E, and by 12 per cent, 23 per cent, and 26 per cent for FY26E. The brokerage gave an  "Accumulate" call, while slashing the target price to Rs 305 from Rs 380, based on 25 times its FY27 EPS of Rs 12. 

 

At 11:02 AM, the stock price of the company rose by 7.08 per cent at Rs 269.25 a piece on the BSE. By comparison, the BSE’s Sensex was up 0.39 per cent to 76,916.21 level.