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Dolat Capital Report
Rallis India Ltd. reported a revenue decline of 9.4% YoY to Rs 7.8 billion (our estimate: Rs 8.6 billion) impacted by weak market conditions both in the international as well the domestic market.
Dynamic pricing actions coupled with improved product mix resulted in gross margin margin expansion of 265 basis points YoY to 38.5% which further translated into Ebitda margins improvement of 101 bps YoY to 14.1%.
Ebitda came in 2.4% lower YoY to Rs 1.1 billion (our estimate: Rs 1.04 billion) which reflected into the profit after tax decline of 7.3% YoY to Rs 630 million (our estimate: Rs 610 million. Also higher interest costs and lower other income impacted profitability).
Outlook and Valuation
With the current industry headwinds expected to continue in the near term, Rallis India's performance over FY24 is expected to remain under pressure. El Nino also remains a key concern which could further impact demand.
Thus with challenging market conditions and weak outlook for international business we downgrade our earnings per share estimates by 31.3/13.6% for FY24E/FY25E.
Factoring in the challenges and limited growth visibility we downgrade our rating to 'Sell' arriving at a fair value of Rs 180/share (18 times FY25E earnings per share).
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