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Wednesday, October 17, 2007

Rallis India - Value Buy

Rallis India is one of India's leading agrochemical companies. The company deals with pesticides, speciality fertilisers, micronutrients and seeds.

Rallis has an extensive distribution system with more than 1,500 distributors and 30,000 dealers nationwide. It also has marketing alliances with several multinational agrochemical companies, including FMC, Nihon Nihyaku, Dupont, Syngenta, Makhteshim Agan and Bayer.

Investor with Low to Medium risk horizon can consider investment into this stock with a horizon of 12 months. At the current price of Rs. 465/- the stocks trades around 5 times it's trailing 12 month EPS of 95. The current quarter results includes a one time profit from sale of land of Rs.873.8 million. Taking into account the income from company core business, excluding the one time payment on sale of land the company trades at 13.7 times it's 12 month trailing EPS of 34. At the current valuation the stock is available at a discount to it's peers like Bayer. Buy the stock with a target price of Rs. 660/- based on it's FY08E EPS of 44.

The company currently has a good domestic presence and the international business currently accounts for just 22% of the company’s revenues. The company currently is taking aggresive initiative to grow it's international business in the short to medium term. Rallis is also looking for strategic acquisitions and licensing deals in the international market to enhance it's global presence. Currently the global agrochemical business accounts for a huge $35 billion of which more than two-thirds is off-patented (without patent exclusivity) products. Rallis initiative of tapping into the off-patented international business can prove better earnings visibility and margins in the future.

Fundamentals

1) In the domestic market, Rallis is the second largest player after Bayer CropScience Ltd.
2) International business expected to grow at a faster rate in days to come.
3) Rallis currently enjoys about 14% market share in the local pesticide and crop-protection market.

Risks

1) The Company´s business is seasonal in nature and the performance can be impacted by weather conditions.
2) Delay in the initiative to increase it's international business.

Posted by Srivatsan

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1 comment:

USHA said...

Thanks for updated informations...and suggestions...Keep going.

October 18, 2007 at 12:23 PM

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During fundamental analysis we look at a stock from three aspects

Company

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Industry

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