PESTICIDES maker Rallis India’s growth drive continued unabated as the company posted a 28.4% growth in its net profit at 58.7 crore in the quarter ended September 30, 2010. The company has been performing well in the past three years with improving profitability.
The rise in the company’s September quarter numbers were driven by a 14.7% growth in net revenues at 368 crore. Operating profit inched up by 80 basis points to 24% despite a jump in trading activity, as the company curtailed its other expenditure. A dip in depreciation and interest costs boosted the profit growth to 20.8% at the PBT level. However, 2.1 crore of extraordinary cost towards VRS in the yearago period meant the growth in PBT appeared 24.4%.
Tax provisioning at a slightly reduced rate raised the profit growth further to 28.4%. The company’s performance in the September quarter was helped by a better monsoon this year. While the overall acreage under cultivation increased around 7% across the country, the acreage of high pesticide consuming crops, such as paddy, pulses and cotton, grew particularly higher. Even heavy rains resulted in an increase in weeds and fungal diseases, which also favoured the company’s growth.
The company is currently in the process of completing its greenfield agrochemicals plant in Dahej by the end of November 2010. The plant, which is being set up at a capital cost of 150 crore, is expected to generate revenues of 500 crore over a three-year period. This will add nearly 50% to the company’s gross block. While the first phase of the new unit will be primarily used to meet Rallis’ captive requirements, it is contemplating a second phase for expanding its contract manufacturing portfolio. Rallis has utilised its strong operating cashflows over the past couple of
years to pay off its debt.
The outstanding debt, which stood at 82.5 crore as on March 31, 2009, has fallen to 9.2 crore as on September 2010. This improved cash generation, out of better working capital management, has enabled the company raise dividends over the past six years. The favourable conditions have induced it to consider an interim dividend this year. In accordance with the company’s strategy to give specific emphasis on new products, it launched three new products in the first half of FY11.
Considering the recent results, the company is being valued over 23 times its earnings for the past 12 months. This is the highest among leading domestic agrochemicals players. The company’s growth for the past few years and improving financial health indeed justify a premium valuation. However, for a new investor, the scrip is no longer attractively valued.
The rise in the company’s September quarter numbers were driven by a 14.7% growth in net revenues at 368 crore. Operating profit inched up by 80 basis points to 24% despite a jump in trading activity, as the company curtailed its other expenditure. A dip in depreciation and interest costs boosted the profit growth to 20.8% at the PBT level. However, 2.1 crore of extraordinary cost towards VRS in the yearago period meant the growth in PBT appeared 24.4%.
Tax provisioning at a slightly reduced rate raised the profit growth further to 28.4%. The company’s performance in the September quarter was helped by a better monsoon this year. While the overall acreage under cultivation increased around 7% across the country, the acreage of high pesticide consuming crops, such as paddy, pulses and cotton, grew particularly higher. Even heavy rains resulted in an increase in weeds and fungal diseases, which also favoured the company’s growth.
The company is currently in the process of completing its greenfield agrochemicals plant in Dahej by the end of November 2010. The plant, which is being set up at a capital cost of 150 crore, is expected to generate revenues of 500 crore over a three-year period. This will add nearly 50% to the company’s gross block. While the first phase of the new unit will be primarily used to meet Rallis’ captive requirements, it is contemplating a second phase for expanding its contract manufacturing portfolio. Rallis has utilised its strong operating cashflows over the past couple of
years to pay off its debt.
The outstanding debt, which stood at 82.5 crore as on March 31, 2009, has fallen to 9.2 crore as on September 2010. This improved cash generation, out of better working capital management, has enabled the company raise dividends over the past six years. The favourable conditions have induced it to consider an interim dividend this year. In accordance with the company’s strategy to give specific emphasis on new products, it launched three new products in the first half of FY11.
Considering the recent results, the company is being valued over 23 times its earnings for the past 12 months. This is the highest among leading domestic agrochemicals players. The company’s growth for the past few years and improving financial health indeed justify a premium valuation. However, for a new investor, the scrip is no longer attractively valued.
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