ICICI Direct: Rallis India - New Capex, Rise In Acreages To Aid Q1 Performance

ICICI Direct Report

Rallis India Ltd.’s Q1 reported topline growth of 6% YoY to Rs 663 crore versus our expectation of Rs 725 crore. The lower growth was primarily due to poor sales from seed and international business. Revenue from the seed business grew 2.8% YoY to Rs 261 crore while the same from crop protection was up 10.7% YoY to Rs 402 crore. Higher gross margins (up 230 basis points YoY) due to increase in the realisation and change in the product mix translated into expansion in operational performance.

Operating profit margin (OPM) improved 415 basis points YoY to 19.4% resulting in Ebitda growth of 35.4% YoY to Rs 128 crore versus our expectation of Rs 110 crore. OPM from crop protection business expanded 596 basis points YoY to 11.2%, while the same from seed business improved 228 basis points YoY to 31.4%. Better operational performance, higher other income (up 47% YoY) and lower taxes (23.5% vs. 30.7% in Q1 FY20) led to bottomline growth of 52.6% YoY to Rs 91.9 crore versus our expectation of Rs 80 crore.

Going ahead, increase in the Contract Research and Manufacturing Services (CRAMS) portfolio along with any progress towards inching up gross margins through change in the product mix or increasing backward integration is likely to lead to a new trajectory for the stock, going forward.

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