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Rallis India: Strong start to the year - Views on News from Equitymaster
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Rallis India: Strong start to the year
Jul 17, 2010

Rallis India has announced its 1QFY11 results. The company has reported a 22% YoY and 58% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline grows by 22% YoY during the quarter
  • Operating profits grow at 16% YoY, thanks to a marginal drop in margins
  • Bottomline growth comes in at a strong 58% YoY as lower tax rate and the absence of one time charges more than make up for lower operating margins. Excluding the extraordinary, net profit grows by 30%.


Rs m 1QFY10 1QFY11 Change
Net sales 1,665 2,028 21.8%
Expenditure 1,469 1,801 22.7%
Operating profit 196 227 15.6%
Operating margins (%) 11.8% 11.2%
Other Income 11 16 43.9%
Interest (net) 2 (9)  
Depreciation 36 36 0.0%
Profit before Tax 169 216 27.7%
Extraordinary item (20) -  
Tax 55 68 22.9%
Profit after Tax/(Loss) 94 148 57.5%
Net profit margin (%) 5.7% 7.3%  
No. of Shares (m) 12.0 19.5  
Diluted Earnings per share (Rs)* 4.84 4.7  
Price to earnings ratio (x)*   21.9  
*12 months trailing earning

What has driven performance in 1QFY11?
  • Rallis reported a 22% YoY growth in sales during 1QFY11. The performance of the domestic business was good during the quarter on the back of the success of new agrochemical products launched by the company in recent years. New products introduced during the year included ‘Ralligold’ and ‘Taarak’. The international business too recorded an improved performance during the quarter.

  • Rallis’ operating margins fell to 11.2% in 1QFY11, from 11.8% in 1QFY10. Higher staff costs and other expenditure (as percentage of sales) were the reasons for this fall in margins.

    Cost break-up...
    (Rs m) 1QFY10 1QFY11 Change
    Raw materials 762 938 23.1%
    % sales 45.8% 46.3%  
    Staff cost 178 184 3.4%
    % sales 10.7% 9.1%  
    Other expenditure 529 679 28.5%
    % sales 31.8% 33.5%  

  • Despite the fall in operating margins, Rallis’ net profits came in higher by 58% YoY during 1QFY11. This was because a lower tax rate and the absence of one time charges during the quarter more than made up for lower operating margins. Excluding the extraordinary, net profit grew by 30%.

What to expect?
At the current price of Rs 1200, the stock is trading at a multiple of around 21.9 times its trailing 12-months earnings. The management has indicated that the company’s new project at Dahej is at an advanced stage of completion and will be commissioned during the current quarter. We maintain our positive view on the stock from a long term perspective.

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