Rallis India: after a muted Q4, gains from a good monsoon?
Agrochemical company Rallis India has seen flat Q4 results, with company revenues falling 1% YoY and 9% below analyst estimates due to increased raw material costs, the weak NE monsoon and fall in paddy output. For the entire financial year, the company saw stronger revenue growth at 10% YoY. The revenue of subsidiaries like its seed business Metahelix fell in double digits, declining 20% YoY, due to the company said, "supply side constraints". With the Indian Meteorological Department predicting a near-normal monsoon, expecting Indian Ocean conditions that would counter El Nino effects, rainfall is projected to be healthy. The support provided by the Budget should also offer a boost to this industry and Rallis India - allocation towards agriculture & farmer welfare increased 16% YoY, with focus on insurance and irrigation. Farm mechanisation subsidy increases, and increase in agricultural credit are also likely to provide an immediate boost. The company is raising prices linked to raw material costs, to reduce the pressure on its margins. Management is expecting subsidiaries like Metahelix to recover and grow in double digits in FY18, as the company moves to an end to end model for farmers, focused on helping them improve farm revenues. ICICI Securities issued a buy on Rallis on April 26. The company's share price is currently trending below its 50 day SMA.27-04-2017