Geojit Financial Services keeps BUY on Rallis India

Geojit Financial Services keeps BUY on Rallis India
Comment E-mail Print Share
First Published: Wed, Sep 10 2008. 09 28 AM IST
Updated: Wed, Sep 10 2008. 09 28 AM IST
Rallis India, a Tata Enterprise, is one of India’s leading agrochem player engaged in manufacture, trading & export of agrochem, plant growth nutrients & seeds and seeds chemicals.
Shortage of area under cultivation, increasing population, higher demand from emerging markets of China & India, usage of land to produce biofuels has led to food shortage and higher farm output prices.
With a view to improve food output, there is increased focus on improving crop nutrition as well as crop protection. Rallis is well positioned to capitalise on opportunities in growing agrochem market.
To de-risk business from seasonality, Rallis has adopted strategy that focuses on exports that contribute ~24% of sales. This is expected to grow at 40-50% for next 2-3 years and will contribute ~ 40% of sales.
Rallis’ key strength is its wide distribution network with over 1,500 dealers and 30,000 retailers and a strong farmer connect.
New launches
Rallis has a strong thrust on new brand launches which have been possible due to its strong R&D focus. It has also entered into strategic long term alliances with research based MNC agrochem companies for bringing in new molecules and new formulation technologies for commercialization in India.
The company has land holdings of around 150 acres which gives it financial flexibility to fund future capex.
It has 15% stake in Pharma and agrochem contract research firm Advinus Therapeutics-Bangalore (Formerly R&D division of Rallis). This can create great value for Rallis.
With topline expected to grow at ~ 22% and bottomline at the rate of ~27% with improvement in profitability, company’s future appears bright. Rallis is having surplus assets, value of which is maybe equivalent or more than its market capitalization.
At CMP, stock is trading 11.5 times FY 2009 expected Consolidated EPS of Rs.46.8 and 8.6 times FY 2010 expected consolidated EPS of Rs.62.9. Buy at CMP with long term perspective.
Comment E-mail Print Share
First Published: Wed, Sep 10 2008. 09 28 AM IST
More Topics: Stock Ideas | Money Matters | Equities |