Rallis: Revamped channel policies and improved price realisation drives performance

Dated: 19th July 2019

1QFY20 Results

• Rallis reported a 9% YoY increase in consolidated revenues at Rs 6,232 mn. The Standalone revenues of Rs 3,631 mn (+3% YoY) were driven by 12% YoY growth in exports. The seeds business (Metahelix subsidiary) revenues grew by 18% YoY to Rs 2,601 mn.
• EBITDA margins improved by 70bps YoY to 15.2%. Increase in raw material costs was offset by savings in other expenses. EBITDA was up 14% YoY to Rs 948 mn.
• The Effective tax rate for 1QFY20 was lower at 22% v/s 28% in 1QFY19. The Consolidated PAT grew by 24% YoY to Rs 678 mn v/s Rs 547 mn in 1QFY19.  

Management Commentary

• Despite the delayed monsoon and impacted sowings; the revamped channel policies and improved price realisation led to a satisfactory performance both the agrochemicals and seeds segment in the domestic market.
• International Crop Protection chemical business at Rs 1,416 mn grew by 12% YoY and contributed 39% of the standalone revenues.
• The effective tax rate was lower during the quarter due to the classification of a part of the business as agriculture income for taxation purpose.
• Other expenses declined due to the pushover of the product launch expenses into 2QFY20.
• The Capex plans for FY20E stand at ~Rs 2,000 mn including backward integration for 2 of the molecules.
• The Board of Directors of the Company had approved the Scheme of Amalgamation of Metahelix life Sciences Limited (a wholly-owned subsidiary) with the Company.

Consensus Estimate (Source: market screener website)

• The closing price of Rallis is Rs 154/- on 19-Jul-19. It traded at 16x / 13x the consensus EPS for FY 20E / FY 21E EPS of Rs 9.6 / 11.5 respectively.
• Consensus target price of Rs 180/- implies a PE of 16x on FY21E EPS of Rs 11.5.