This Tata Group stock could rally over 30% as Anand Rathi sees upside
1 min read 30 Dec 2021, 01:31 PM ISTThe brokerage house has initiated coverage on the Tata Group stock Rallis India with a Buy recommendation
PremiumConsidering its capex plans, focus on product launches, gaining export market-share, rising FCFs, expanding return ratios and strong balance sheet, Rallis India’s long-term performance leaves analysts at Anand Rathi upbeat. They expect the company's revenue/profit to clock 12%/22% CAGRs (compound annual growth rate) over FY22-24.
In a note, Anand Rathi said that it has initiated coverage on the Tata Group stock with a Buy rating, at a target price of ₹350 per share. “Key short-term monitorables are the increasing use of illegal cotton seed, rising input costs and softer demand for contract manufacturing," the brokerage said.
Though, Anand Rathi sees failure to diversify to a non-kharif range of seeds, greater use of illegal herbicide-tolerant cotton seeds, monsoon dependence, delay in launching products and slowdown in R&D as key risks for the stock.
“Rallis’ international crop protection business clocked an 12% CAGR over FY16-21. To support this growth, it is expanding capacities, setting up capacities for critical inputs (backward integration), registering more products and focusing on R&D to develop relevant products for key markets. We expect the growth momentum to continue. We expect international crop care business would register a 15% CAGR over FY22-24," the note added.
Rallis' seeds business primarily caters to kharif crops and recorded a 10% CAGR over FY16-21. To fill gaps in its see range, reduce dependence on kharif crops and enhance operations across segments, the company is developing products to diversify into rabi season products. Anand Rathi expects the company's seeds business revenue to clock a 7% CAGR over FY22-24.
Chemical manufacturing company Rallis, a Tata Enterprise is a subsidiary of Tata Chemicals, with its business presence in the Farm Essentials vertical. It is one of India's leading crop care companies.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
