Rallis India - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Rallis India (RAIL) reported robust sales growth, but pressure on the OPM continued to put pressure on the net profit. The company's consolidated net sales grew by 16.0% yoy to Rs.338cr. OPM for the quarter though higher than 1%, was still low at 10.2%.This dip in OPM resulted in a only 4.5% yoy growth in the company's adjusted net profit to Rs.24cr. Going forward, we expect RAIL to register a CAGR of 15.0% and 18.9% in its net sales and profit over FY2012-14, respectively. We remain Neutral on the stock.

Disappointment on OPM continues: RAIL's revenue for the quarter grew by 16.0% yoy to Rs.338cr. On the operating front, gross margin came in at 44.1%, down 107bp yoy. However, there was a sharp dip in OPM, which declined to 10.1% in 1QFY2013 vs. 12.9% in 1QFY2012.This resulted in a growth of 4.5% yoy in adjusted net profit to Rs.24cr .

Outlook and valuation: Management is confident about the long prospects for the agrochemicals industry. We expect RAIL to register a CAGR of 15.0% and 18.9% in its net sales and profit over FY2012-14, respectively. At current levels, the stock is trading at fair valuations of 14.9x FY2014E EPS. Hence, we maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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