Rallis India - A subdued quarter; all hopes on rabi now; Metahelix shines - GEPL Capital

Rallis India Ltd (Rallis) reported an 11% Y-o-Y increase in Total Income to Rs.4,855 mn in Q2FY13 from Rs.4,372 mn in Q2FY12. The growth was led by price hikes implemented in select products; hence we believe that volume growth has been subdued.

EBITDA was 5% lower Y-o-Y at Rs.967 mn in Q2FY13 vs Rs.1,023 mn in Q2FY12. This was mainly due to increase in raw material costs & promotional activities related to Metahelix's products. Hence, EBITDA margin dipped by 347bps to 19.9% in Q2FY13 from 23.4% in Q2FY12.

PAT was 5.2% higher at Rs.616 mn in Q2FY13 vs Rs.585 mn in Q2FY12. Rallis reported a forex gain of Rs.24 mn vs forex loss of Rs.67 mn last year. Excluding the forex impact, PAT was 9% lower at Rs.591mn. PAT margin was slightly lower at 12.8% in Q2FY13 vs 13.5% in Q2FY12.

At the CMP of Rs.138, Rallis is trading at 14.5x its FY14E EPS of Rs.9.52. We expect Rallis to have a strong Q3FY13. However, considering the recent run in stock price, we believe that there is little room left for further appreciation. Hence, we value the stock at its long term P/E multiple of 15x to arrive at the target price of Rs.146 with a NEUTRAL rating.

Source : Equity Bulls

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