Angel Broking recommends Neutral on Rallis India

Rallis India (Rallis) reported robust numbers for 3QFY2014. The company posted sales and adj. net profit of Rs. 396cr and Rs. 29cr, registering a yoy growth of of 16.5% and 31.5% respectively. The net profit before tax come in at Rs. 45cr, posting a growth of 35.3% yoy. However, higher taxation during the quarter contained the adj. net profit growth at 31.5%. On the other hand, the reported net profit came in at Rs. 30cr, registering a yoy growth of 38.0%, on back of higher other income. We recommend a Neutral rating on the stock.

Robust growth: The company posted sales and adj. net profit of Rs. 396cr and Rs. 29cr, registering a yoy growth of 16.5% and 31.5% respectively. The gross profit margin during the quarter came in at 40.8%, an expansion of 173bp; however, in spite of the same, the OPM for the quarter came in at 12.8% vs 12.9% in the corresponding quarter of the previous year. The net profit before tax came in at Rs. 45cr, posting a growth of 35.3% yoy. The tax provision during the quarter came in at 41.5% of PBT vs 28.0% in 3QFY2013, thereby impacting net profit growth. Due to higher taxation during the quarter, the adj. net profit growth was contained at 31.5%. The reported net profit came in at Rs. 30cr, registering a yoy growth of 38.0%, on back of higher other income.

Outlook and valuation: The Management is confident about the long-term prospects of the agrochemicals industry. We expect Rallis to register a CAGR of 17.6% and 23.2% in net sales and profit respectively, over FY2013-15. At the current levels, the stock is trading at a fair valuation of 19.9x FY2015E EPS. Hence, we maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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