Antique Stock Broking has maintained its 'Sell' rating on Rallis India Ltd, a subsidiary of Tata Chemicals Ltd, even as the scrip climbed nearly 13 per cent in the previous session on beating consensus estimates in the September quarter. While Antique Stock Broking revised its target price for the Tata group stock upward to Rs 310 from Rs 250, it cited long-term business underperformance and premium valuation behind its 'Sell' call.
"The anticipated recovery in the agrochemical industry, new product launch pipeline, and expected steady scale-up of the CSM business will result in long-term growth for the company. However, considering the premium valuations, we maintain SELL with a revised TP of Rs 310 (earlier INR 250), valuing it at 20 times FY27E EPS," Antique Stock Broking said.
Another brokerage, Arihant Capital markets said it values Rallis India at 30 times of its FY27 EPS of Rs 21.20. It cut its rating to 'Hold' on the stock due to recent rally while increasing the target Price to Rs 398 per share from Rs 332.
Antique Stock Broking said Rallis India reported strong Q2FY25 results led by volume growth, beating consensus estimates on all fronts. Domestic revenue for Rallis India was up 11 per cent YoY, led by 17 per cent growth in volume. The international business revenue fell 9 per cent YoY, led by decline in realisation and flat volumes YoY.
Rallis India's Seeds revenue was up 48 per cent YoY, led by product mix and Ebitda was up 25 per cent YoY with margin expanding 190 bps YoY to 18 per cent, led by strong performance in seeds business.
"The company continues to be cautious about the export market. However, demand in the domestic market will continue to be buoyant as good reservoir levels will pave the way for a decent Rabi season," Antique Stock Broking said.
Further, it believes the strong growth is due to the company’s decision to postpone inventory placement from Q1FY25 to Q2FY25, resulting in H1FY25 revenue, Ebitda and PAT growth normalising at 6 per cent, 8 per cent and 1 per cent YoY, respectively.
"Considering higher Ebitda for the seeds business and other income, we have upgraded our FY25/FY26/FY27 estimates by 22 per cent/ 19 per cent/ 13 per cent, respectively," Antique Stock Broking said.