rallis india
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Microsec Research19 Aug 2011
gdeb@microsec.in
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Microsec Research19 Aug 2011
gdeb@microsec.in
TABLE OF CONTENTS:
Topic Page No
Investment Highlights 03‐ 03
Company Overview 04‐ 04
Business Overview 05‐ 05
Industry Overview 05‐ 06
Investment Thesis 07‐ 13
Brand Building, Distribution and Relationship Models 07‐ 08
Product Portfolio and Contract Manufacturing agreements 09‐ 12
Dahej Plant to strengthen International Presence 12‐ 12
Acquisition of Metahelix 12‐ 13
Peer Group 14‐ 14
Key Management Profile 14‐ 14
Valuation 15‐ 15
Risk to the Rating 15‐ 15
Financials 16‐ 16
Disclaimer 17‐ 19
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Microsec Research19 Aug 2011
gdeb@microsec.in
We re-initiate coverage on Rallis India Ltd (Rallis). Our rating underpins the company’s
brand building activities, wide distribution network, and competitive research team with
technical innovation capabilities. Rallis has wide range of product portfolio, launching 3-6
new products every year. In addition to that, the company has strengthened relationship
with farming community and other end users through different service providing models
such as EAGLE, Rallis Kisan Kutumba, MoPu, Saathi, Bhagidari Sabhas, Apollo, and Disha.
Furthermore, commissioning of port based Dehaj facility to strengthen international
presence and acquisition of Seed Research Company Metahelix Life Sciences make Rallis
more attractive.
Investment Highlights
Brand building, distribution networks and maintaining relationship with the end
customers through various relationship models help the company to increase
market presence and therefore top line growth.
Technical innovation capabilities, deep understanding of organic chemistry and
systematic development of new products reduces product life cycle which are likely
to help Rallis launch 3-6 new products every year that helps the company to have
a wide range of crop and region specific product portfolios.
Port based Dehaj plant is likely to strengthen international presence through
capacity addition for contract manufacturing.
Acquiring 59.02% stake in Bangalore based seed research company Metahelix Life
Sciences, Rallis can access exclusive hybrid pipelines, regulatory clearance with
over 100 hybrids in pipeline, branded Dhaanya seeds, competent research team
which help the company to serve farmer in better way that is likely to make Rallis
competitive against the peers.
Rallis – Financial Performance at a glance
Particulars (In `Mn) FY2009 FY2010 FY2011 FY2012E FY2013E
Revenue 8,366.89 8,786.77 10,657.04 13,464.83 16,435.45
Growth(%) 24.03% 5.02% 21.29% 26.35% 22.06%
EBITDA 1,108.80 1,448.74 1,713.45 2,258.28 2,787.31
EBITDA Margins (%) 13.25% 16.49% 16.08% 16.77% 16.96%
Net Profit 720.19 1,014.88 1,260.37 1,566.24 1,952.44
Net Profit Margins (%) 8.61% 11.55% 11.83% 11.63% 11.88%
Net Profit Growth (%) ‐42.52% 40.92% 24.19% 24.27% 24.66%
EPS 6.01 7.83 6.48 8.05 10.04
BVPS 27.43 29.86 23.90 29.99 39.03
P/E 4.35 10.69 20.37 20.19 16.20
P/BV 0.95 2.80 5.53 5.42 4.17
EV/EBITDA 3.49 7.46 15.60 14.10 10.99
ROE 20.59% 23.91% 24.96% 23.68% 22.79%
Source: Company Data, Microsec Research
Rallis India Ltd- Rely on the Agro gold
BUY Sector- Agrochemicals
Current Market Price (INR) 162.60
Target Price (INR) 190.00
Upside (%) 17%
52 Week High/Low (INR) 174.3/116.67
Market Capitalization (In INR Mn) 31,620.66
Market Data
BSE Code 500355
NSE Code RALLIS
Bloomberg Ticker RALI IB
Reuters Ticker RALL. BO
Face Value (INR) 1.00
Equity Share Capital (In INR Mn) 194.47
Average P/E 21.9x
Beta vs Sensex 0.67
Average Daily Volume 74,186
Dividend Yield 1.2%
STOCK SCAN
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Microsec Research19 Aug 2011
gdeb@microsec.in
Company Overview
Rallis India Ltd (Rallis), subsidiary of Tata Chemicals Ltd is a leading crop protection player. The
company sells its products across 80% of India’s districts through the wide range of distribution
channels with supportive retailers and dealers. In addition to that, Rallis supplies technical grades
and intermediates to the different chemicals and agrochemical companies such as Bayer, Syngenta,
Excel, UPL, Gharda, Cheminova, Dhanuka and Nagarjuna. The company has manufacturing units for
pesticides and fine chemicals that are located in Ankleshwar, Akola, Turbhe, Lote, Patancheru and
Dahej. The flexible manufacturing process enables the company to produce new product in short
period of time with cost competitive advantages. It has got ISO 9002 certification for pesticides and
fine chemicals plants. By acquisition of 59.02% stake in Metahelix, Rallis has strengthened its
position in the seed business.
History & Background
Rallis was incorporated in the year of 1948 in Calcutta. It is headquartered in Mumbai.
Rallis: Event
Source: Company Data, Microsec Research
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Microsec Research19 Aug 2011
gdeb@microsec.in
Business Overview
Rallis has categorized its business into the Domestic Agri Business, Institutional Business,
International Business and Contract Services. Under the Domestic Agri Business, Rallis operates in
the area of pesticides, herbicides, fungicides, plant growth nutrients, seeds and also providing agri
services to the farming community. Rallis has about 13% market share in the `6000-7000 cores
insecticide business; a vertical which is estimated to have grown by about 12%-15% in India. This
segment is contributing 60% to the company’s total revenues.
Product Category Segment wise revenue contribution (%)
Source: Microsec Research, Company Data Source: Microsec Research, Company Data
Due to the performance of key brands, the domestic business showed 20% growth during FY11. In
the rising cost and labor shortage scenario, the company is providing knowledge to the farming
community about high yield seeds, crop management techniques and crop protection method to
improve the productivity of different crops. The domestic institutional business consists of crop
protections, seed treatment chemicals and household pesticides. Rallis has strengthen international
business through new registrations, alliances, contract manufacturing and also by setting up fully
owned subsidiary in Australia in the name of Rallis Australasia Pty Ltd to increase direct market
presence outside India. The International Business division registered 34% top line growth during
the year due to the rising price and demand of crop commodities.
Industry Overview
Global agrochemical industry is growing at a CAGR of more than 7.5% on account of rising food
prices during FY2009-FY2011. World’s total number of people is rising by about 75 million per year.
UN estimates that world population might reach 9 billion by 2050. Furthermore, the World Bank
estimates that food requirement will rise by 50% by 2030 driven not only by population growth but
also by an expanding middle class in developing countries with a growing preference for Western
diets. Besides rising population, decreasing rate of fertile land, changing weather pattern, growing
water scarcity are the other important factors for increasing food inflation. To reduce food inflation,
Government has to focus on increasing farm productivity by using sufficient region specific and crop
specific agri-inputs and investing in R&D-farm technology innovation.
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Microsec Research19 Aug 2011
gdeb@microsec.in
Source: Microsec Research, Company Data Source: Microsec Research, Company Data
Indian agrochemical industry is one of the fastest growing sectors in the economy. With an
estimated worth of $28 billion, it accounts for 12.5% of the country’s total industrial production and
16.2% of the total exports from the Indian manufacturing sector. The future of pesticide industry’s
export is looking good as the share of generic products are going to increase driven by $4billion
agrochemical molecules are likely to go off patent and generic players will find opportunity to grab
the market share. In addition to that, the companies with strong R&D team and continuously
introducing new products are likely to be benefitted from the situation of getting banned of old
products or lose market share because pests are starting to become resistant.
Based on the application, agrochemical industry is segregated into insecticides, fungicides,
herbicides, bio-pesticides and plant growth nutrients. Out of the top 20 agrochemicals sold in India,
16 are from insecticide categories. However, global market is dominated by herbicides which have
48% share followed by 29% insecticides and 17% fungicides. In India, Andhra Pradesh, Tamil Nadu,
Karnataka and Punjab account for 50% of the total pesticide market.
Agrochemical Market Size (In ` Cr) Product Category in Agrochemical Industry
Source: Microsec Research, Company Data Source: Microsec Research, Company Data
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Microsec Research19 Aug 2011
gdeb@microsec.in
Investment Thesis
Rallis is a leading crop protection player in India. In Q1 FY12, the company reported yoy growth of
19% and 12% in top line and bottom line respectively on standalone basis and after incorporate the
results of Metahelix, the consolidated top line and bottom line was escalated by 46% and 90%
respectively though it may not be comparable on yoy basis. The consolidated revenue of Rallis shows
12% growth (CAGR) over the period of 2007-2011 whereas bottom line jumped at an annual rate of
17% over the same period. The increasing trend of minimum support price of food commodity due to
the growing population and rising income level boost the demand of agri inputs. We expect Rallis is
likely to show good performance due to the acquisition of Metahelix and commissioning of Dahej
facility in the current fiscal year. The details analysis is as follows:
Brand Building, Wide Distribution Network and Relationship Model to increase market presence
Rallis has its presence worldwide over 50 countries through new registrations, alliances and contract
manufacturing. To increase direct market presence outside India, the company has also fully owned
subsidiary in Australia in the name of Rallis Australasia Pty Ltd. Around 23% of revenue
contribution coming from international markets like USA, South East Asia, Australia, and Africa.
According to the management, it is likely to contribute approximately 40% in the coming 2-3 years.
In domestic country, Rallis distribution network covers 80% of total districts with more than 4000
dealers and 30,000 retailers. The company has 7 regional offices, 28 area sales offices, 39 depots and
field staff headquarters with 400 field staff and more than 1000 field assistants across the country.
Worldwide Distribution Network of Rallis
Source: Microsec Research, Company Data
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Microsec Research19 Aug 2011
gdeb@microsec.in
Rallis is following differentiated strategies to penetrate market and promote its products. The
company has invested heavily in the brand building process. Through its wide distribution channels,
first it makes contact with the farmers; then different innovative strategies like posters, wall
paintings, video campaign, slides show in movie theaters, slogan designs, demonstrations, quizzes
and mass campaign Rallis creates awareness and enhances visibility of its products in the mind of the
farming community. Furthermore together with University of Agriculture and Department of
Agriculture, Rallis has conducted over 8000 demonstrations involving 20-25 farmers each for making
the farmers to familiar with good agriculture practices and right products. In addition to that, by
providing value added services like sms alert on crop prices, weather, and possible disease outbreak,
identifies current and future farmer’s needs, the company ensures customer satisfaction. Rallis
currently covers over 5 lakhs farmers and intends to scale up to 1 Mn farmers by FY12. Moreover
“Prema” visits are being organized wherein farmers from one area taken to other locations to observe
and learn good crop management practices from other farmers and newsletters in the name of Unnat
Kisan in local languages are circulated for better knowledge to the farming community. All of these
brand building and customer centric activities make the products of Rallis to be renowned and easy
to recall which in turn help Rallis for doubling the sales of Ergon, Takum, Applaud, Asataf, Manik,
Tata Metri and Taqat and help farmers to protect their crops effectively, improving yields and
ultimately improving farmers living of standard.
Relationship Models
Source: Microsec Research, Company Data
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Microsec Research19 Aug 2011
gdeb@microsec.in
Product portfolios, new launches along with contract manufacturing agreements to boost growth
Agrochemical R&D is very similar to those Pharmaceuticals. Developing a molecule with registration
is time consuming, takes around 2-4 years and after that the product can be multibillion dollar
opportunity or a complete disaster. Indian agrochemical product registration process is one of the
stringent in Asia and takes around 2-3 years for approvals of each new formulation from the time of
registration as it has to undergo extensive field trials with respect to chemistry, toxicology,
metabolism, soil residue and packaging- labeling.
The strong R&D team of Rallis continuously focuses on developing innovative new products with
various combination and better efficacy. The technological superiority in the research department
and systematic development of new products reduces product life cycle which helps Rallis to launch
around 3-6 products every year that leads to have large number of innovative quality products in the
pipeline and make Rallis competitive in the Industry.
R&D Expenditure from FY2007-FY2011 Product Registration & Launched from FY2002-FY2011
Source: Microsec Research, Company Data Source: Microsec Research, Company Data
Rallis Research Center is located at Patancheru, Andhra Pradesh. It is recognized by Department of
Scientific And Industrial Research under the Ministry of Science And Technology. During FY11, the
company has incurred R&D expenditure of `9.24 cores against `6.02 cores in FY10 towards the
product development and registration.
Awareness of Brands Rallis’ products in Safer & High Toxic Category (%)
YearProduct
Registration
Product
LaunchedKey New Products
2002‐03 4 3 Tata Reeva, Contaf Plus
2003‐04 7 6 Manik, Fateh, Samarth, Termex, Tatamida, Sentry
2004‐05 7 6 Anant, Daksh, Preet, Sartaj, Samarth, Prabal
2005‐06 4 3 Prabhaav, Spiro, Koranda
2006‐07 6 3 Applaud, Taqat, Nova
2007‐08 5 4 Takumi, Sedna, Royal, Ishaan
2008‐09 7 3 Mantis, Cartox S.P
2009‐10 5 3 Ergon, Balwan
2010‐11 4 3 Toran, Ralligold, Taarak
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Microsec Research19 Aug 2011
gdeb@microsec.in
New Products Launch in Proportion of Total sales Pesticides Revenue % Growth
Source: Microsec Research, Company Data Source: Microsec Research, Company Data
Rallis has wide range of product portfolios depending on the nature of Indian climates and crop
pattern. Besides pesticides, herbicides, insecticides, the company has its presence in hybrid varieties
of maize, paddy, and cotton. Rallis’ new product sales contribute around 24-31% to its total sales.
Some of the popular products are Contaf, Contaf Plus, Master, Fujione, Fatch, Tata Metri, Tata
Panida, Daksh, Reeva, Asataf, Manik, Rogor, Ralligold, and Ergon. Our of these Contaf, Rogor,
Asataf, Tatamida, Contaf Plus, Applaud, Tatamono are the top seven brands out of twelve top crop
protection brands in India. In addition to that, the company has different household products such as
Termax, Sentry, and RalliGel to control cockroaches, houseflies, and mosquitoes.
Insecticides
Product Crop Pest
Asataf(Acephate) Tobacco, Sugarcane,Chillies,Fruits, Cereals Sucking & Chewing Insects
Anant(Thiamethoxam) Paddy, Cotton Plant Hopper, Green Leaf Hopper, Aphids, Jassids, Thrips
Applaud Paddy Nymph Stage of Whitefly, Planthoppers
Cartox G(Cartap Hydrochloride) Rice Stem Borer, Leaf Folder, Whorl Maggot
Cartox SP(Cartap Hydrochloride) Vegetables, Rice Stem Borer & Leaf Folder
Daksh(Indoxacarb) Cotton Bollworm, Diamond Back Moth
Electra(Carbamate Insecticide) Rice, chillies Caterpiller, Sucking pests
Endotaf(Endosulfan) Cotton, Pulses, Groundnut,rice,mango Chewing Pests,Hoppers
Impeder Cotton Bollworm,Whiteflies
Koranda 505(Chloropyrifos) Cotton Aphids, Jassids, Thrips, White fly, Bollworm
Manik(Acetamiprid) Cotton Aphids, jassids, White Flies
Nagata(Cypermethrin) Cotton,Fruit,Vegetables, Pulses Whiteflies,Bollworms,Caterpillars
Prabal(Profenofos) Cotton Bollworm,Jassids,Aphids, Thrips, Whiteflies
Ralo(Cypermethrin) Cotton, Fruit,Vegetables,Pulses Sucking, Chewing & boring pests
Reeva(Lambda cyhalothrin) Cereals, Potatoes,Vegetables, Cotton Chewing Pests,Hoppers
Rogor(Dimethoate) Crops Sucking pests, Chewing insects, Mites
Spiro(Thiodicarb) Cotton,Cabbage Bollworm
Tata Cyper(Cypermethrin) Cotton,Fruit, Vegetables, Pulses Sucking pests, Chewing insects, Boring pests
Tatamida SL(Imidachloprid) Cotton,Rice,Chilli,Mango,Sugarcane Aphids,Whiteflies,Hoppers,Thrips,Jassids,Termites
Tata Mono(Monocrotophos) Wide range of Crops Chewing & Boring insects
Tatafen(Fenvalerate) Wide range of Crops Chewing,Sucking,Boring insects
Tatafuran Cereals,Pulses,Oilseeds,Vegetables,Fruits Caterpiller, Sucking pests,Root grub
Tefethion(Ethion) Chillies,Cotton,Fruits, Vegetables Mites
Tritox Rice,Soyabean,Brinjal WhiteFlies,Leaf Folder,Girdle Beetle,Shoot & Fruit Borer
Volphor(Phorate) Rice,Sugarcane Stem Borers,BPH
Toran Cotton Sucking pests
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Microsec Research19 Aug 2011
gdeb@microsec.in
Herbicides
Fungicides
Source: Microsec Research, Company Data
Over the year, Rallis has build strong relationship with different companies such as Bayer, Syngenta
India, Yara International, Borax International in the segment of agrochemicals, fine chemicals,
specialty chemicals, polymers and pharma intermediates for contract manufacturing of Technical
formulations and intermediates.
Product Crop Target Herb
Atrataf(Atrazine) Maize,Sorghum,Coffee,Oil Palm,Banana,pineapple,Guava Annual Grasses,Broad Leaved Weeds
Dhar(Isoproturon) Wheat Weeds
Fateh(Sulfosulfuron) Wheat Phalaris minor,Chenopodium album,Melilotus alba
Preet(Pretilachlor) Rice Echinochloa sp, Cyperus iria, Cyperus difformis, Pannicum repens
Sartaj(Piroxofop‐Propinyl) Wheat Polaris minor
Tata Panida(Pendimethalin) Soybean,Groundnut,Cotton,Mustard 51 types of annual grasses, broad leaved weeds
Tata Metri(Metribuzin) Wheat,Soybean,Potato,Tomato,Sugarcane Annual grasses,Broadleaf Weeds
Teer Paddy Broad Leafed Weeds
Teg(Metsulfuron Methyl) Wheat, Paddy Weeds
Taarak Paddy Weeds
Product
Blitox(Copper Oxychloride)
Captaf(Captan)
Contaf(Hexaconazole)
Contaf Plus(Hexaconazole)
Fujione(Isoprothiolane)
Master(Mancozeb+Metalaxyl)
Samarth(Hexaconazole)
Sultaf(Sulphur 80%)
Tata M45(Mencozeb 75%)
Target Fungi and Crops
Blights of potato,tomato,fruits diseases,mildew of tobacco,vegetables, diseases of coffee, tea
Wide variety of fungus in seeding stage & mature plant
Blight & leafspots of paddy,powdery mildew of grapes, Chillies
Powdery mildews, rusts,leaf spots in cereals, oil seeds, Rice Sheath Blight
Blast disease in Paddy
Downy mildew of Grapes, Late Blight of Potato & Tomato, Blotch of Onion, Damping off in Tobacco & Cardamom
Powdery Mildew & Fruit Rot in Chillies, Early Blight & Late blight in Potato
Powdery Mildew of Apple, Grapes, Cow pea, Moong, Urid, Pea, Chillies, Okra, Mango, Citrus
Brown & Black rust of Wheat, Blast of Paddy, Damping off of Chillies
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Microsec Research19 Aug 2011
gdeb@microsec.in
Contract manufacturing Agreements
Source: Microsec Research, Company Data
Port based Dahej plant to strengthen International Presence
Rallis has set up agrochemicals manufacturing plant at Dahej in Bharuch district of Gujarat with an
investment of `180 cores. A portion of fund comes from internal accruals. As per Financial Times
Group, SEZ at Dahej is the top 25 best global economic zones. From this location, Rallis is likely to
get export benefit as well as tax benefit. The commercial production of this unit has been
commenced on June 2011. This plant is likely to add more production lines for its existing products
with the estimated production capacity of 45,790 MTPA besides 10,000 MTPA of formulations in the
solid and liquid form and make new room for introduction of new products for direct selling to the
farmers as well as contract manufacturing to serve its overseas clients in better manner.
Acquiring Metahelix a right strategic move for long term
A genetically modified seed company which develop pests resistance seeds to increase yield can be
the main competitor for an agrochemical company. From our view, the acquiring 59.02% stake of
seed research company, Metahelix through internal accruals is the right strategic move of Rallis for
the long tenure. As we know, seed industry has high entry barriers in the form of product
Intellectual Property, regulatory clearance, and substantial investment by the way of R&D,
manpower. In addition to that developing a typical product takes years of time to complete. By this
acquisition, Rallis is likely to be benefitted by getting diversified hybrid and genetically modified
product portfolio, regulatory clearance with over 100 hybrids in pipeline, competitive research team
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Microsec Research19 Aug 2011
gdeb@microsec.in
and well known Dhaanya brand. Furthermore, Metahelix is entering in Vietnam, Thailand,
Indonesia and Philippines for rice and maize hybrid.
Seed Industry Benefit of Rallis after acquiring Metahelix
Source: Microsec Research, Company Data Source: Microsec Research, Company Data
The `6500 crores Indian seed market is the 6th largest in the world and growing at a rate of 12-13%
pa. Metahelix is an agricultural biotechnology company focusing on developing high technologies
crop protection and improved productivity hybrid seeds in rice, maize, cotton, millet, tomato, and
sunflower. Its research firms are situated at Bangalore, Hyderabad and Aurangabad.
Product of Metahelix
Source: Microsec Research, Company Data
Product Varieties Duration(Days) Area of Adaptation
Paddy(DRH‐775) 120‐125 Haryana,Uttaranchal,Tamil Nadu, M.P, Jharkhand
Paddy)DRH‐748) 135‐140 A P, Karnataka, Maharashtra, Uttaranchal, Eastern UP, Orissa, Tripura
Maize(DMH‐8255) 115‐120 Irrigated‐assures rainfall areas
Maize(MM‐7314) 100‐105 All over India
Maize(DMH‐888) 100‐110 Assured rainfall areas
Maize(DMH‐849) 90‐100 All over India
Cotton(BADRI) 145‐150 Central & South India
Cotton(Badri plus Bt) 145‐150 A.P, Tamil Nadu, Gujarat, M.P, Karnataka
Cotton(MC 5112 Bt) 160‐170 A.P, Tamil Nadu, Gujarat, M.P, Karnataka
Cotton(MC 5103 Bt) 145‐170 Gujarat, parts of M.P
Cotton(MC‐3Bt) 145‐170 Punjab,Haryana, Gujarat, parts of M.P
Cotton(Rana Pratap Bt) 145‐170 Central & South India
Pearl Millet(MP 7792) 72‐75 Gujarat, Rajasthan, Haryana, UP, Maharashtra, Karnataka)
Pearl Millet(MP 7882) 78‐80 Gujarat,Rajasthan, Haryana, UP
Pearl Millet(MP 7872) 78‐80 Gujarat, Rajasthan, Haryana, UP, Maharashtra, Karnataka)
Sunflower(3389) 90‐105 All over India
Tomato(MANOHAR) 65‐70 All over India
Tomato(NISHA) 65 All over India
Tomato(AMRUTHA) 65‐70 All over India
Tomato(RANJITHA) 70‐75 All over India
Tomato(CHARMI) 70‐75 All over India
Tomato(PKM 1) 120‐125 All over India
Tomato(S22) 120‐130 All over India
OKRA(SENORA) 45 Southern States
HOT PEPPER(DCX‐3160) 65‐70 All over India
HOT PEPPER(DAMINI) 65‐70 A.P, Maharashtra
HOT PEPPER(PRIYA) 50‐55 Gujarat,A.P, M.P, Maharashtra
HOT PEPPER(UJJWAL) 53‐58 Central,Western & Northern Part of India
HOT PEPPER(REDHOT) 60‐65 All over India
HOT PEPPER(DHAANYA MEGA HOT) 65‐70 South, North, East
HOT PEPPER(ARUN) 70‐75 A.P, U.P,M.P
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Microsec Research19 Aug 2011
gdeb@microsec.in
Peer Group
Key Management Profile
R. Gopalakrishnan Chairman Vice Chairman in Hindustan Lever Ltd,
Chairman of Unilever Arabia, MD of Brooke
Bond Lipton & Director of Board of several
Tata companies
B.Sc(Physics) from Calcutta university,
Engineering from IIT Kharagpur, Advanced
Management Programme from Harvard
Business School
V. Shankar MD & CEO Chief Operating Officer in Phosphates
Business of Tata Chemicals
Chartered Accountant, Cost Accountant,
Company Secretary & Law Graduate
Girish Nadkarni CFO Vice President‐New Business, M&A,
Finance at Tata Chemicals Ltd & Tata
Industries Ltd, Head of Capital Markets
Practice at Avendus Advisors Private Ltd,
CFO of International Business, Placement &
Merchant Banking at HSBC
InvestDirect(India) Ltd
PGDM from IIM(A), ICWA
K. Venkatadri Executive Vice
President‐Sales &
Marketing
Senior Manager(Strategy & Business
Devlopment) of Tata Chemicals Ltd
Bachlor of Engineering(Mech)
Key Members in the Board
Revenues 10,657.04 56496.9 5412.25 3582.6
Growth (%) 21.29% 6.80% 21.47% ‐12.65%
EBITDA 1,713.45 10596.4 778.63 652
EBITDA Margins (%) 16.08% 18.76% 14.39% 18.20%
Net Profit 1,260.37 5576.2 511.12 428.3
Net Profit Margins (%) 11.83% 9.87% 9.44% 11.96%
Growth (%) 24.19% 5.98% 40.66% ‐20.42%
EPS 6.48 12.45 10.22 49.63
BVPS 25.96 80.68 34.08 433.74
P/E 20.37 12.08 7.63 38.84
P/BV 5.09 1.86 2.29 4.44
RoE 27.12% 16.60% 38.20% 11.80%
EV/EBITDA 15.70 12.35 5.72 29.03
Source: Microsec Research, Company Data, Bloomberg, Ace Equity; FY11
Particulars (In `Mn) Rallis IndiaUnited
Phosphorus
Monsanto
India
Dhanuka
Agritech
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Microsec Research19 Aug 2011
gdeb@microsec.in
Valuation
We adopted a comparable valuation method to value Rallis based on Price-to-Earning (P/E)
multiples. Currently, Rallis is trading at 16.2x on its FY13 EPS (E) of `10.04. In the longer
run, we expect the company continue to trade at a premium over the peer group average
P/E based on its right strategic move and outperformance. As a result, we assign the multiple
of 19x and arrive at a target price of `190 for the stock. Our target price translates a 17%
upside over Rallis’ current stock price.
Rallis: P/E Bands:
Source: Company, Microsec Research, Bloomberg
Rallis: EV/EBITDA Bands:
Source: Company, Microsec Research, Bloomberg
Risks to the Rating
Rallis is highly dependent on weather. The fluctuation of rainfall and its distribution
may affect the top line growth of the company.
Fluctuation of exchange rate and oil price has effect on margins as well as earnings.
Any legislation related issue on key products may affect its revenue.
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Microsec Research19 Aug 2011
gdeb@microsec.in
Financials (All numbers in ` Mn unless specified)
Income Statement (In `Mn) FY2009 FY2010 FY2011 FY2012E FY2013E
Revenue 8,366.89 8,786.77 10,657.04 13,464.83 16,435.45
Gross Profit 3,295.03 3,731.60 4,320.93 5,557.16 6,797.56
EBITDA 1,108.80 1,448.74 1,713.45 2,258.28 2,787.31
Dep 229.49 183.10 174.85 295.51 444.45
EBIT 879.31 1,265.64 1,538.60 1,962.77 2,342.86
Interest 34.31 27.29 39.85 51.69 57.84
Other Income 227.39 288.75 345.96 511.66 706.72
PBT 1,072.39 1,527.11 1,844.71 2,422.74 2,991.74
Tax 352.20 512.22 580.41 799.51 978.30
Net Profit 720.19 1,014.88 1,260.37 1,566.24 1,952.44
Adj EPS 6.01 7.83 6.48 8.05 10.04
Cash Flow Statement (In `Mn) FY2009 FY2010 FY2011 FY2012 FY2013
Net Profit Before Tax 1,072.39 1,527.11 1,844.71 2,422.74 2,991.74
Dep 229.49 183.10 174.85 295.51 444.45
Intertest(Net) 30.73 22.73 25.01 51.69 57.84
Operating Profit before WC Changes 1,297.34 1,723.38 1,920.37 2,769.94 3,494.03
Operating Cash Flow 1,391.47 2,150.25 987.26 1,961.22 2,175.75
Investing Cash Flow (1,423.49) (912.47) (1,441.07) (1,013.33) (859.41)
Financing Cash Flow 30.29 (1,202.83) 452.63 (46.05) (52.23)
Net Change In Cash (1.73) 34.95 (1.18) 901.84 1,264.10
Opening Balance 70.25 68.53 103.48 116.90 1,018.74
Closing Balance 68.53 103.48 116.90 1,018.74 2,282.85
Balance Sheet (In `Mn) FY2009 FY2010 FY2011 FY2012E FY2013E
Share Capital 999.85 129.65 194.47 194.50 194.50
Reserves & Surplus 2,497.54 4,114.91 4,854.75 6,420.98 8,373.43
Shareholders' Funds 3,497.39 4,244.56 5,049.22 6,615.48 8,567.93
Secured 248.11 16.12 1,087.31 1,092.92 1,098.53
Unsecured 576.64 65.01 84.82 84.82 84.82
Loan Funds 824.75 81.13 1,172.14 1,177.75 1,183.36
SOURCES OF FUNDS 4,322.14 4,325.69 6,275.11 7,903.99 9,923.04
Gross Block 3,376.57 3,090.97 4,056.88 5,056.88 5,856.88
Accumulated Dep/ Amor 1,790.68 1,563.50 1,742.53 2,038.04 2,482.49
Net Block 1,585.88 1,527.47 2,314.34 3,018.84 3,374.39
Capital Work in Progress 290.71 1,120.29 1,694.51 1,694.51 1,694.51
Fixed Assets 1,876.59 2,647.76 4,008.85 4,713.35 5,068.90
Investments 1,361.53 1,402.30 255.97 269.30 328.71
Inventories 1,492.51 1,488.70 2,289.20 2,379.47 2,897.89
Sundry Debtors 1,159.91 755.06 1,063.50 1,106.70 1,350.86
Cash & Bank Balances 81.86 118.97 145.75 1,047.59 2,311.69
Other Current Assets 11.26 14.59 12.84 15.86 21.61
Loans & Advances 773.57 886.17 1,154.22 1,280.34 1,568.08
Current Assets, Loans & Advances 3,519.11 3,263.47 4,665.51 5,829.96 8,150.14
Current Liabilities & Provisions 2,607.92 3,041.32 3,891.49 4,144.89 4,860.98
Net Current Assets 911.18 222.15 774.01 1,685.07 3,289.16
APPLICATION OF FUNDS 4,322.14 4,325.69 6,275.11 7,903.99 9,923.04
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Microsec Research19 Aug 2011
gdeb@microsec.in
Microsec Research: Phone No.: 91 33 30512100 Email: microsec_research@microsec.in
Ajay Jaiswal: President, Investment Strategies, Head of Research: ajaiswal@microsec.in
Fundamental Research
Name Sectors Designation Email ID
Nitin Prakash Daga IT, Telecom & Entertainment AVP-Research npdaga@microsec.in
Naveen Vyas Midcaps,Market Strategies AVP-Research nvyas@microsec.in
Nitesh Goenka Metal & Mining Sr. Research Analyst ngoenka@microsec.in
Abhisek Sasmal BFSI Research Analyst asasmal@microsec.in
Sutapa Roy Economy Research Analyst s-roy@microsec.in
Gargi Deb Agriculture & Pharma Research Analyst gdeb@microsec.in
Technical & Derivative Research
Vinit Pagaria Derivatives & Technical VP vpagaria@microsec.in
Ranajit Saha` Technical Research Sr. Manager rksaha@microsec.in
Institutional Desk
Rajiv Lilaramani Institutional Equities Sr. Manager rlilaramani@microsec.in
Dhruva Mittal Institutional Equities Manager dmittal@microsec.in
PMS Division
Siddharth Sedani PMS Research AVP ssedani@microsec.in
Sarmistha Rudra PMS Technical Research Analyst srudra@microsec.in
Research: Financial Planning Division
Shrivardhan Kedia FPD Products Manager Research skedia@microsec.in
Research-Support
Subhabrata Boral Research Support Executive sboral@microsec.in
**Rating Scale
Recommendation Expected absolute returns (%) over 12 months
Strong Buy >20%
Buy between 10% and 20%
Hold between 0% and 10%
Underperform between 0% and -10%
Sell < -10%
- 18 -
Microsec Research19 Aug 2011
gdeb@microsec.in
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