Shares of Rallis India have been struggling at the bourses even since the company posted its results for the quarter ended March on Monday. Analysts at Kotak Securities think the worst is yet to come.

The Rallis India Analyst: Analysts at Kotak Securities maintained the “sell” rating for the stock revising down the price target to ₹200 from ₹220. The revised target indicates an around 26% downside from the stock’s last closing price of ₹270.90.

The Rallis India Thesis: The brokerage in its latest note revised down its revenue estimates for Rallis India’s exports and seeds businesses. The higher finance costs and depreciation led to an 11-13% cut in EPS estimates for FY25-26. One of the challenges identified by the analysts is the structural issue of a genericized product portfolio, which is difficult to address in the short term.

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The brokerage also noted that the management at the Tata Group company has pointed out a challenging demand environment, particularly for the export business. This challenging backdrop was reflected in the soft performance of Q4FY24, which was marred by demand weakness and price pressures. The analysts said that the near-term outlook for the company remains uncertain, with disruptions in seed production and channel inventories of agrochemicals expected to limit growth.

Despite these challenges, Kotak Securities has made a modest upward revision to the EBITDA margin estimates for Rallis India’s crop care business. The domestic brokerage firm also acknowledged the positive change in leadership with the appointment of Gyanendra Shukla, as the new managing director & CEO. The analysts added that Shukla is well-respected within the seeds industry.

Kotak Securities maintains a cautious stance on Rallis India as it thinks that the current valuation is stretched.

Price Action: Rallis India shares were trading 1.53% lower at ₹266.75 on Wednesday morning after markets opened.

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