Rallis India (Rallis) posted a disappointing set of numbers for 3QFY2016. Sales for
the quarter came in at Rs306cr V/s Rs385cr in 3QFY2015, a dip of 20.4% yoy.
Higher sales return in the domestic segment and cancellation of orders by
clients in global markets, along with a dip in the seed business, led to the
decline in the top-line. On the operating front, the gross margin came in at 48.2%
V/s 46.8% in 3QFY2015; still the OPM declined to 10.2% V/s 12.0% in 3QFY2015.
This was owing to lower sales during the quarter. The PAT came in at Rs20cr V/s
`25cr in 3QFY2015, a dip of 19.9% yoy. We remain Neutral on the stock.
Disappointing numbers for the quarter: Sales for the quarter came in at Rs306cr
V/s Rs385cr in 3QFY2015, a dip of 20.4% yoy. Higher sales return in the
domestic segment and cancellation of orders by clients in global markets,
along with a dip in the seed business, led to the decline in the top-line. On
the operating front, the gross margin came in at 48.2% V/s 46.8% in
3QFY2015; still the OPM declined to 10.2% V/s 12.0% in 3QFY2015. This was
owing to lower sales during the quarter. The PAT came in at Rs20cr V/s Rs25cr in
3QFY2015, a dip of 19.9% yoy. The dip in PAT was lower than that in the
EBDITA as tax outgo during the quarter was lower than in the corresponding
quarter of last year.
Outlook and valuation: Given the pressure on the financials, we expect Rallis
to register an 8.9% dip in sales in FY2016. For FY2015-17E, we expect a
CAGR of 3.7% and 3.4% in net sales and profit, respectively, with recovery
expected in FY2017E. At the current levels, the stock is trading at a fair
valuation of 17.3x its FY2017E EPS. Hence, we maintain our Neutral
recommendation on the stock.
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