Jhunjhunwala Portfolio News: Rakesh Jhunjhunwala-owned agrochemical maker Rallis India’s share price has plummeted 6% in the last one week, after weak quarterly results. Rallis India reported a 1.4% on-year drop in net profit to Rs 82.3 crore in the April-June quarter owing to lower than expected operational performance. This was despite an 11.7% growth in revenue during the same period. The dull quarterly performance has forced analysts at Kotak Securities to downgrade the stock to ‘Sell’ rating and cut fair value to Rs 300 per share. Big bull Rakesh Jhunjhunwala along with his wife owns more than a 9% stake in the company.
Kotak Securities – Sell
Fair value: Rs 300
On Friday morning Rallis India’s share price was down 2.7% trading at Rs 317 per share. Analysts at Kotak Securities said that Rallis India has reported a 5% decline in EBITDA during a seasonally strong quarter. “Rallis EBITDA declined 5% in its seasonally strongest quarter led by higher raw material prices and fixed expenses. Delay in capex, higher raw material prices and weak performance in Kharif season lead to 8-10% cut in our FY2022-23E EBITDA estimates,” they said. While the company is on the verge of completing capex, Kotak Securities said they are cautious on the capex and its ramp-up; and fear that this can result in RoCE-dilutive capital allocation.
Edelweiss – Hold
Target price: Rs 311
Rallis India’s domestic business saw healthy revenue growth but Edelweiss Securities is concerned about the international business. “International business has been down by 8% on-year due to a sales spill-over in Q1FY21. Rallies is seeing optimum utilization in most of AIs; however metribuzin continues to be under pressure due to soft demand,” they said in a note. Seeing the lag in the international business pickup, Edelweiss securities has a ‘Hold’ rating on the stock with a target price of Rs 311.
ICICI Direct – Buy
Target price: Rs 400
On the other hand, banking on the capex to aid future performance, ICICI Direct has a buy rating on the stock. “We retain BUY rating on the back of better growth outlook from both domestic and international crop care business,” they said. Lower pricing pressure for key molecules in the international market along with better volume growth visibility, backward integration of few technicals can likely translate into improvement in gross margins, and an increase in custom synthesis/CRAMS business revenue are seen as key triggers for the stock. ICICI Direct has a target of Rs 400 on the stock.
Rakesh Jhunjhunwala along with his wife Reka Jhunjhunwala owns a 9.93% stake in Rallis India. The ace investor had trimmed his stake in the company during the July-September quarter last year from 10.3%. Since the march 2020 sell-off, the stock has zoomed 88%.
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