Rallis India Ltd.    
24 Jan 2020
227.90
-1.58%
A rally for Rallis India after December results

by Suhani Adilabadkar

For Rallis India, the December quarter was a strong one, with the stock climbing 15% and hitting a fresh 52-week high after the Q3FY20 result announcement.

Rallis India is a subsidiary of Tata Chemicals and part of the $110 bn Tata Group. The company has a legacy of 168 years with its product portfolio running across the entire agriculture value chain –from plant protection chemicals to hybrid seeds, plant growth nutrients and soil conditioners.

Manufacturing facilities are located at Ankleshwar and Dahej in Gujarat and Lote and Akola in Maharashtra, supported by the Rallis Innovation Chemistry Hub (RICH) in Bengaluru. The company’s supply chain comprises of  28 depots, 1 hub warehouse, 12 regional offices, 3,667 dealers and 40,432 retailers. After a muted FY19, Rallis India has been performing well over the past three quarters with its stock gaining 60% since June last year. 

Quick Takes:

  • Revenue came out strongly at Rs. 533.6 crore against Rs. 417 crore same period previous year rising 28% YoY. 

  • Operating profit doubled YoY from Rs. 27.6 crore in Q3FY19 to Rs. 55 crore in December quarter FY20.

  • Capex plan of about Rs. 800 crore for the next 4-5 years has already been outlined by Rallis India.

  • Rallis stock has gained 20% since its December quarterly result announcement.

Green shoots in the December quarter FY20

Rallis India reported impressive growth for the December quarter, driven by both domestic and international business. Revenue came out strongly at Rs. 533.6 crore against Rs. 417 crore in the same period last year, rising 28% YoY aided by extended kharif season and its spillover effect on better than last year rabi season.

Operating profit doubled YoY from Rs. 27.6 crore in Q3FY19 to Rs. 55.7 crore in December quarter FY20. Operating margins jumped 383 bps YoY reported at 10.45% in Q3FY20 compared to 6.62% corresponding quarter, previous year. PAT for December quarter galloped at 176% or jumped 2.7 times reported at Rs. 38 crore against Rs. 13.8 crore in Q3FY19. In Q3FY20, domestic business grew 35% whereas international sales jumped 25% YoY. Rallis stock has gained 20% since its December quarterly result announcement. 

An Invigorated Agrochemical Sector

Farming in India is a fraught exercise. 50% of arable land is dependent on unpredictable monsoon rain, and a recent uptrend in droughts has affected farmer incomes. Agriculture inputs, fertilizers, pesticides, insecticides, seeds, bio stimulants and micro-nutrients play an important role. India is the second largest consumer of fertilizers globally with a seed market of about $2.5 bn, biostimulants market of  around $75 mn, micro-nutrients $20 bn while the pesticides segment is expected to grow at a CAGR of 9% in the next five years. 

These agri-inputs constitute 86% of Rallis India’s revenue platform followed by contract manufacturing at around 12%. The revenue stream is two courses geographically - domestic and international. Domestic business focused on agri inputs namely seeds (paddy, millet, maize, BT cotton, mustard, vegetables), crop protection (herbicides, fungicides, insecticides, seed treatment chemicals, household pesticides), plant growth nutrients and organic compost.

Rallis India’s product basket is more skewed towards kharif crops and efforts are being made by management to move it towards rabi and also strengthen its vegetable product portfolio. In the international business, there are twin engines, the first one being the alliance business which develops molecules for global agro chemicals, polymers and animal care players boasting five major products, Pendimethalin (herbicide), Acephate (insecticide), Hexaconazole (fungicide), Metribuzin (herbicide) and Metalaxyl (fungicide). The other engine, contract manufacturing has only two products, Poly Ether Ketone (high-performance, engineering thermoplastic used in aerospace, automotive, structural, high temperature electrical) and Metconazole (fungicide). 

Agrochemical sector is back on the investor radar, as the sector is expected to perform well in the December quarter aided by strong monsoons, higher reservoir levels leading to higher rabi sowing and strong profitability for Indian agrochemical companies. On similar lines, Mr. Sanjiv Lal, the MD and CEO of Rallis India said that positive December results were on the back of positive sentiment among farmers and better water availability. Speaking on Rallis performance in Q3FY20, he further added, “During the current crop season our business was supported by positive farmer sentiment, new product launches and refreshed trade policies. 

Our international business continued to perform positively amidst certain headwinds. I am pleased to announce that the Board of Rallis has approved setting up of a new ‘state of the art’ R&D facility in Bengaluru to drive further growth”.  

Back On the Investor Radar

Rallis had reported PAT decline of 45% a year ago in Q3FY19, due to higher input cost and raw material uncertainty. Q4FY19 was even worse with net profit plummeting by 93% and revenue falling 8% YoY. FY18-19 on the whole was impacted by shutting down of upstream raw material suppliers in China due to environmental regulations, leading to raw material scarcity and price hikes, as well as erratic and uneven distribution of rainfall leading to shifting in crop and pest load. With the beginning of Q1FY20, momentum improved and further consolidated in the September quarter FY20.

With the December quarter, the domestic engine seems to have reignited with 35% YoY growth which had been either flat, muted or remained in negative territory for the past few quarters. Revival of the domestic growth engine is one of the major reasons for the recent upward trajectory of Rallis stock price. 

The substantial improvement in margins has been another performance indicator in Q3FY20 as the overhang of high cost inventory accumulated during FY19 seems to be reducing along with lower input costs.

In addition, Rallis is undertaking backward integration for Metribuzin, reducing its dependence on imported raw material from China which will improve EBDITA/kg in the long run. Capex plan of about Rs. 800 crore for the next 4-5 years has already been outlined which includes formulation capacity at Dahej chemical zone expected to be operational by next Kharif season, new active ingredients, backward integration to reduce raw material import dependence and capacity expansion of Metribuzin by 500 ton per annum (1st phase) has already been completed and 2nd phase is underway to be operational by February 2020.

The 2nd phase of 500 ton per annum capacity expansion would raise the total capacity to 2,000 tons per annum which will be about 15% of the global Metribuzin market doubling its revenues at full capacity utilization by FY21. 

Apart from growth impetus through capex, Rallis is also adding new products at high speed, six products in the past three quarters which have altogether garnered Rs. 50 crore in the nine-month period ending  December 31, 2019. In the December quarter, Rallis introduced two new formulations, Sarthak (registration) and Impeder (co-marketing). In addition to that, there is an ambitious target to submit 60 dossiers during the year, of which 75% would be for Africa and South East helping to de-risk its international portfolio largely skewed towards North America and Brazil. 

Rallis India is moving well on its growth agenda and aspires to be amongst the top 3 leading enterprises by 2025 in the chosen areas within farm inputs and chemistry led businesses.  

Hem Securities released a Buy report for Rallis India Ltd. with a price target of 270.0 on 21 Jan, 2020.
Trendlyne Marketwatch    
24 Jan 2020
LIVE: Markets close higher, Atul, Ultratech Cement jump on results

Markets rose in today's trading. Nifty 50 closed at 12249.25 (68.9, 0.6%) , BSE Sensex closed at 41613.19 (226.8, 0.6%) while the broader Nifty 500 closed at 10084.10 (62.7, 0.6%). Market breadth is in the green. Of the 1648 stocks traded today, 896 were on the uptrend, and 660 went down.

Riding High:

Largecap and midcap gainers today include Au Small Finance Bank Ltd. (1064.95, 9.28%), Quess Corp Ltd. (617.80, 6.17%) and Endurance Technologies Ltd. (1174.00, 5.21%).

Downers:

Largecap and midcap losers today include PNB Housing Finance Ltd. (482.00, -10.69%), Edelweiss Financial Services Ltd. (92.50, -5.61%) and NMDC Ltd. (128.40, -3.42%).

Volume Shockers

41 stocks in BSE 500 are trading on high volumes today.

Top high volume gainers on BSE included Au Small Finance Bank Ltd. (1064.95, 9.28%), Allcargo Logistics Ltd. (112.80, 8.46%) and ICICI Securities Ltd. (473.50, 7.02%).

Top high volume losers on BSE were Zensar Technologies Ltd. (174.00, -12.52%), PNB Housing Finance Ltd. (482.00, -10.69%) and Reliance Power Ltd. (2.10, -4.55%).

Solar Industries India Ltd. (1185.00, 2.95%) was trading at 11.3 times of weekly average. Adani Gas Ltd. (176.50, 2.08%) and Blue Star Ltd. (839.90, 0.02%) were trading with volumes 10.9 and 9.9 times weekly average respectively on BSE at the time of posting this article.

BSE 500: highs, lows and moving averages

42 stocks hit their 52 week highs, while 1 stock were underachiever and hit their 52 week lows.

Stocks touching their year highs included - Amara Raja Batteries Ltd. (805.15, 1.81%), Atul Ltd. (4601.00, 5.00%) and Bata India Ltd. (1847.75, 2.62%).

Stock making new 52 weeks lows included - Future Retail Ltd. (334.00, -1.75%).

20 stocks climbed above their 200 day SMA including Schneider Electric Infrastructure Ltd. (85.50, 3.83%) and Power Finance Corporation Ltd. (116.30, 2.83%). 5 stocks slipped below their 200 SMA including LIC Housing Finance Ltd. (462.65, -2.91%) and Gujarat Mineral Development Corporation Ltd. (65.70, -2.81%).

Photo by Appaiah

Allcargo Logistics Ltd.    
24 Jan 2020
112.25
7.93%
Top Gainers in the News: Allcargo Logistics, Indostar Capital, YES Bank, Lemon Tree Hotels, Essel Propack

by Ritmbarah Arora

Allcargo Logistics: The share price of Allcargo Logistics has soared 10.6% to Rs 115.1. Around 1.7 million shares in volume have been traded so far. The share price increased 9.8% since the last week and 19.8% since the last month.

Allcargo has acquired 13% stake in express logistics firm Gati Ltd, which the firm announced on Tuesday, January 21. Allcargo has already infused Rs 100 crores into Gati as part of preferential allotment process, and last week the company acquired 27 lakh shares in Gati through open market purchases. The company is listed in 21 screeners on Trendlyne.

Indostar Capital: The share price of Indostar Capital Finance advanced 8.7% to Rs 259 as of now. Around 1.7 lakh shares in volume have been traded so far. The share price of Indostar Capital Finance is up 8% since the past week and 47.8% since the last month. The company is listed in 17 screeners on Trendlyne.

YES Bank: YES Bank’s share price jumped 8.5% as of this writing, rising for the second consecutive trading session. Around 119.3 million shares in volume have been traded so far and is among the most traded shares today.The share increased 12.5% since the last week and has fallen 13.8% since the last month, as per Trendlyne data.

The share price of YES Bank started rising after the SBI Chairman Rajnish Kumar implied that the bank is too big to fail. He added that it would not be good for the Indian economy if YES Bank collapsed, and that solutions should emerge. The bank is listed in 23 screeners on Trendlyne.

Lemon Tree Hotels: The share price of Lemon Tree Hotels surged 5.8% to Rs 53.7 as of this writing. Around 4.8 lakh shares in volume have been traded today so far. The share price of Lemon Tree Hotels has fallen 5.6% since the last week and 16.9% since the last month. The Q3FY20 revenue of hotel chains including Lemon Tree Hotels has been estimated higher from the year-ago period, although operating margin of the company may face a temporary setback as fixed overheads from new properties may increase. The company is listed in 20 screeners on Trendlyne. 

Essel Propack: Essel Propack’s share price rose 5% to Rs 184.7 while around 2.4 lakh shares in volume have been traded so far. The share price increased 4.8% since the last week and 7.3% since the last month. The company is listed in 21 screeners on Trendlyne.

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Allcargo Logistics Ltd. is trading at high volume of 2.4M with price gain of 7.93.
YES Bank Ltd.    
23 Jan 2020
42.80
4.52%
YES Bank jumps on SBI Chairman essentially saying its 'too big to fail'

YES Bank has been in the doldrums for a while, with potential fundraising efforts falling apart, analysts smelling blood with SELL calls and cash strapped shareholders such as SICAL Logistics selling shares on invocation of pledges. SBI Chairman Rajnish Kumar however, roused up investors today by saying that the struggling private bank would not be allowed to fail - a move many observers have been recommending, on fears that a fall for YES Bank would set off a contagion in Indian financial markets. YES Bank's loan book size stands at approximately $40 billion.

 "I am sure that some solutions will emerge", the SBI Chairman reportedly said with regard to the Bank, adding that the Bank failing would be a negative for the Indian economy. Investors and analysts are closely watching for any announcement around fundraising and rescue leading up to the EGM scheduled for February 7.  YES Bank is in 20 SWOT screeners, with the majority in the weakness category. 

FII/FPI have decreased their holdings by 11.34% of holdings in Dec 2019 qtr.
Au Small Finance Bank Ltd.    
23 Jan 2020
1070.70
9.87%
Top Gainers in the News: Au Small Finance Bank, Vodafone Idea, Indiabulls Housing Finance, Dishman Carbogen, Reliance Infrastructure

Au Small Finance Bank: The shares of Au Small Finance Bank have advanced 8.2% to Rs 959.5. Around 1.2 million shares in volume have been traded so far. The share price increased 9.4% since the last week and 21.1% since the last month, per Trendlyne data.

Au Small Finance Bank has reported double of its net profit to Rs 190.2 crore for Q3FY20 as against a net profit of Rs 95.3 crore in Q3FY19. Total income rose to Rs 1,272.8 crore from Rs 894.3 crore earlier while the total expenses rose to Rs 959.9 crore in Q3FY20 from Rs 715.6 crore in Q3FY19. Au Small Finance Bank is listed in 25 screenerson Trendlyne. See all Q3 results

Vodafone Idea: The shares of Vodafone Idea soared 7.1% to Rs 6 while around 168.3 million shares in volume have been traded so far and is among the most traded shares today. The share price of Vodafone Idea is up 0.8% since the past week and has fallen 5.5% since the last month.

Vodafone Idea informed the Department of Telecommunications (DoT) that it will wait for the decision of the Supreme Court on the adjusted gross revenue (AGR) modification pleas, suggesting that it is not likely to make any payments to the government by today, which was the January 23, 2020 deadline. The company is listed in 16 screeners on Trendlyne.

Indiabulls Housing Finance: Indiabulls Housing Finance shares jumped 6.5% to Rs 315.5 as of now. Around 15.6 million shares in volume have been traded so far today. The share price increased 2.6% since the last week and 6.6% since the last month. CK Narayan of Chart Advise has issued a ‘sell’ call on Indiabulls Housing Finance with a target price of Rs 282 on January 21, 2020. He has recommended a stoploss at Rs 299. The company is listed in 17 screeners on Trendlyne.

Dishman Carbogen Amcis: The share price of Dishman Carbogen Amcis surged 5% to Rs 83.8. Around 4.7 lakh shares in volume have been traded so far. The share price has fallen 5.5% since the last week and 7% since the last month. The Income Tax department had conducted search at the offices of Dishman Carbogen Amcis which was concluded on December 25, 2019. The company is listed in 20 screeners on Trendlyne.

Reliance Infrastructure: The shares of Reliance Infrastructure rose 4.9% to Rs 21.5 as of this writing. Around 4.5 million shares in volume have been traded so far. The share price decreased 4% since the last week and 11.7% since the last month, as per Trendlyne data. The company is listed in 22 screeners on Trendlyne.

Au Small Finance Bank Ltd. is trading at high volume of 4.2M with price gain of 9.87.
Tata Elxsi Ltd.    
22 Jan 2020
963.25
-0.52%
Despite JLR weakness, Tata Elxsi sees growth accelerate

by Suhani Adilabadkar

Tata Elxsi jumped 5% after the Q3FY20 result announcement, reporting strong and steady numbers in a seasonally weak quarter. Tata Elxsi, part of the Tata group, is among the world’s leading providers of design and technology services across automotive, broadcast, communications and healthcare industries. The company’s operations are mainly classified into two business segments, software development & services, and systems integration & support.

Software development & services accounts for 96% of its revenues, and Tata Elxsi offers under its head, electronics, software development and system design services for the automotive industry, provides for the product development lifecycle from R&D, new product development and testing. Tata Elxsi implements and integrates systems and solutions for specialized applications under the systems integration & support division, such as high-performance computing, computer aided design, and virtual reality. 85% of its revenues accrue from outside India and about 92-93% of revenues in any period come from its existing customers. 

Quick Takes 

  • Highest ever quarterly revenue at Rs. 423 crore against Rs. 407 crore same period previous year, rising 4% YoY and 10% sequentially in Q3FY20.

  • PAT jumped 14% YoY and 51% sequentially reported at Rs. 75 crore.

  • Transportation vertical grew 10%, medical 5.3% and healthcare 40% QoQ in Q3FY20.

  • Utilization rate improved to 75% in Q3FY20 from 71% in September quarter FY20.

 

A surprisingly strong December Quarter FY20 

Revenue from operations stood at Rs. 423 crore against Rs. 407 crore in the same period last year, rising 4% YoY and 10% sequentially in Q3FY20.  Operating profit declined 9% YoY from Rs. 103 crore in Q3FY19 to Rs. 94 crore in the December quarter FY20, impacted by salary hikes (8% offshore and 2% onsite) during the quarter along with higher depreciation and other expenses. 

Consequently, operating margin also dipped reported at 22.2% in Q3FY20 against 25.4% the corresponding quarter last year. PAT or net profit witnessed  the strongest performance over the past five quarters, rising 14% YoY and 51% sequentially, to Rs. 75 crore in Q3FY20. Commenting on the company’s strong quarterly performance, Mr. Manoj Raghavan, CEO and Managing Director, Tata Elxsi, said, “This is a great quarter for the company with the highest ever top-line in its history, with double digit growth in transportation and healthcare verticals. This performance was led by strong execution and ramp-ups in large deals won in the previous quarters, along with the addition of leading customers and wins in the electric vehicles, medical devices and the OTT segments.” 

Recent quarters have been topsy turvy 

Tata Elxsi, unlike its world-renowned sibling, TCS, is not a typical IT company providing consulting, IT solutions and services. Tata Elxsi is into engineering, R&D and design servicing three main verticals of automotive/transportation, media & broadcast and healthcare & medical devices which contributed 48.6%, 39.2% and 8.3% respectively to total revenues in Q3FY20. According  to revenue segmentation by geography, Europe topped the list putting in 41.6%, followed by USA at 33.7%, India at 12.5% and ROW contributing 12.2%. Their top customer, Jaguar contributed 15.7%, next top 5, 37.8% and top 10 customers, 50.8% in December quarter FY20. 

Tata Elxsi was at its 52-week low after Q1FY20, as PAT slumped 31% YoY along with revenue declining 5% and operating profit 34% YoY. The stock currently has gained 60% from its 52-week low trading around 950 levels up 10% in the last five days. It has been a relief plus confidence rally as investors took heart from the December results. Q1FY20 was a forgettable quarter, severely impacted by its largest customer, Jaguar which contributed around 20-22% revenues every quarter till last year. Jaguar had reported sales de-growth in retail units by 11.6% and wholesale fell 9.9% in Q1FY20 with its net revenue declining 3% and EBIT 5.5%. Consequently, the June quarter numbers of Tata Elxsi suffered and the transportation vertical revenue share fell to 46.6% compared to its usual 55% levels. The Jaguar revenue contribution declined from 25.7% in Q1FY19 to 16.3% in Q2FY20 with revenue hit of about Rs. 30 crore in June and September quarter FY20. 

Growth beyond JLR

In Q3FY20, the auto space seems to be in better shape, and though JLR stands at 15.7% of revenue mix, the company has witnessed strong deal wins, a Tier I customer in US and other important OEM wins from APAC region. After a negative June performance, the vertical had grown 9% in Q2FY20 and 10.4% sequentially in December quarter FY20. As per the management, even though the deal pipeline is healthy, there have been delays in decision making and postponement of deals impacting revenue visibility for the automotive vertical. However, in Q3FY20, global conditions in auto industry seem to be improving, non JLR pie expanding and even mild growth is seen in JLR business. The company has also forayed into new automotive adjacencies, such as aerospace, commercial vehicles, off-road and railways which currently account for about 4-5% of vertical’s revenue.  

Apart from 48% revenues from its automotive business, other two growth levers, healthcare and media are also making strong growth strides. Media & broadcast share has increased from 36% in Q1FY19 to around 40% growing 5.5% QoQ in Q3FY20. 

Speaking about media & broadcast customer portfolio, Mr. Manoj Raghavan, said, “Some of the world's leading customers in this space are our customers. Whether you look at the #1 media operator, #2 media operator, #3 media operator in the world - are all our customers. The #1 media operator in India, the #2 media operator, the #1 OTT operator in India - all of them are our customers”. The company does not foresee any decision-making delays in this segment and expects business as usual in the coming quarters. Healthcare has superior margins vis-à-vis other verticals  largely based in Europe and the US. Healthcare business initiated just 3 years back has been growing strongly though over a small base reporting 40% QoQ growth in Q3FY20. There has been strong traction in US and European markets driven by new MDR (medical device regulations) and healthcare revenue share has almost doubled from 4.5% to 8.3% in Q3FY20 over the past one year. Management aims to enhance healthcare contribution to 20-25% of total revenues in the next 3 years.  

Though the company has gone through a rough patch as the auto slowdown worsened since January 2019, 10% sequential revenue growth target has been achieved with highest ever quarterly revenue, utilization rate improved to 75% from 71% QoQ, margins to remain in 22-24% range, optimum cost control and fresh hiring of about 700 engineers in the coming quarters. Now the 15% growth guided in the beginning of the financial year looks achievable. 

 
Number of Mutual Funds holding stock fell by 9 to 8 in Dec 2019 qtr.
Trendlyne Talk    
22 Jan 2020
NEW: Portfolio Health Check, Fundamental Pages

New launches this week include a powerful new Portfolio Analyzer for your portfolio. This gives you a quick Health Check for your portfolio. You can now calculate the true value of your portfolio with the Portfolio NAV, analyze your buy/sell/hold decisions, and get insights on your best and worst investments. 

New fundamental pages have also been launched across all stocks, for simpler analysis. Check out the new pages for Reliance and HDFC Bank

Been tracking Q3 results season via the result dashboard? Here you can drilldown results at both industry and stock level. Our popular Live Result Screeners also let you track results using specific criteria.