Rallis India‘s share price was upbeat on Monday going up over 2% to hit an intraday high of ₹334.35.
What Happened: The company reported a 23.81% decline in net profit for the June quarter, which stood at ₹48 crore compared to ₹63 crore in the same quarter last year.
Revenue for the quarter saw a marginal increase, reaching ₹783 crore. The crop care segment contributed ₹561 crore, reflecting an 8% year-on-year growth, whereas the seeds segment reported revenue of ₹222 crore, marking a 16% decline.
Brokerage Reactions: Kotak Securities maintained its “sell” rating on the stock with a target price of ₹200. The target indicates a downside of around 39% from the stock’s current market price.
The brokerage said that the chemical company’s results fell short of its expectations, noting supply constraints in the seeds business and persistent price pressures in agrochemicals as key factors behind the underperformance.
Revenue for the quarter missed Kotak's and consensus estimates by 2% and 11%, respectively. EBITDA was also below expectations, missing Kotak’s estimates by 19%, while net profit fell short by 25%.
See Also: Kotak Mahindra Bank's Poor Q1 Showing Drags Shares Down To Lowest In 3 Months
The brokerage firm said that the management highlighted improved domestic sentiment due to recent monsoon rains and the consumption of channel inventories. However, challenges persist, including ongoing pricing pressures in agrochemicals and subdued export demand.
The brokerage noted that the Tata Group company has struggled with growth over the past decade amid tough competition and a generic product portfolio heavily impacted by competition from China.
While the new CEO, Gyanendra Shukla, is focusing on promising areas such as innovation, partnerships, and digitisation, improvements may take years, according to the analysts. New growth areas like contract development and manufacturing organisation business and cotton hybrids are currently too small to make a substantial impact, and the oversupply from China seems unlikely to resolve soon, the brokerage said.
Price Action: Rallis India’s share price was up 2.05% to trade at ₹331.30 on Monday afternoon.
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