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NEW DELHI : Rallis India Ltd reported subdued Q2 performance, which impacted investor sentiments, too. The stock has corrected more than 10% in the past few trading sessions since Monday. The impact on performance was largely led by the erratic monsoon season. The uneven and delayed pickup of monsoon meant that the company’s performance came weak with major heat being felt by the seeds business. The seeds business declined by 65% year-on-year (y-o-y). Some support was provided by the crop care segment, which was up 8% y-o-y. The company did well to push exports and its efforts towards dealing with logistic issues helped in exports delivering growth of 22% during the quarter. This provided some respite and the company, thereby could still manage to report consolidated revenues at 728 crore for the quarter, a modest growth of 0.4% over last year’s 725 crore.

The challenges, however, continued being posed by rising raw material costs. The company said the raw material situation “continues to be tough" and he company was "focused on minimizing the disruptions to [its] products as much as possible".

However, with weak sales growth, the company was not able to pass on raw material costs. This impacted the operating performance. Profit after tax (after exceptional items) was 56 crore, registering a decline of 32% over year-ago quarter's 83 crore.

With weak Q2 performance, analysts are tweaking their forward estimates. Considering subdued first half performance, analysts at Antique Stock Broking said that they "trim FY22 and 23 EPS by 14% and 8% respectively".

Even analysts at Kotak Institutional Equities Ltd believe Rallis would continue to face challenges in the domestic market, given its less attractive portfolio, limited pricing power at the industry level itself and large dependence on Chinese imports for intermediates.

Analysts, however, are building in recovery in the export business of Rallis over FY22-24. It has started exporting formulations as well with metribuzin formulation to Brazil and plans to start acephate formulation soon, say analysts. It is also exploring contract manufacturing opportunities with customers. The company is seeing positive traction but actual results will take some time to accrue said analysts at Kotak Institutional Equities.

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