Buy Rallis India; target of Rs 1597: IIFL
Bangalore:IIFL is bullish on Rallis India and has recommended buy rating on the stock with a target of 
1597.According to IIFL, It could explore inorganic growth opportunities, especially in international markets, given its cash position of 1.5 billion. With global markets almost stagnant in agricultural growth, a large acquisition would stretch management bandwidth and could prove expensive.
Rallis India reported interest income in 2QFY11, thanks to the negative working-capital it had to maintain over the last few quarters. Management said debtor days are at a historic low of 14 days. Although the stock is trading at a significant premium to its agro-chemical peer United Phosphorus, IIFL believes this premium is justified, on account of the growth opportunity that Rallis has (driven mainly by domestic market conditions) versus United Phosphoruss overseas markets, which are showing signs of stagnation and the second reason being the sustained improvement in EBITDA margins.
According to IIFL, Rallis India has strong exposure to the domestic market growth opportunity and its role as a complete agro-solutions provider with the launch of its new initiatives; we believe that Ralliss earnings growth potential is comparable to that of other rural plays in India (such as Jain Irrigation). Accordingly, we value the stock at 18x FY12ii EPS, which gives us a target price of 1597, and offers 13 percent upside.
1597.According to IIFL, It could explore inorganic growth opportunities, especially in international markets, given its cash position of 1.5 billion. With global markets almost stagnant in agricultural growth, a large acquisition would stretch management bandwidth and could prove expensive.
Rallis India reported interest income in 2QFY11, thanks to the negative working-capital it had to maintain over the last few quarters. Management said debtor days are at a historic low of 14 days. Although the stock is trading at a significant premium to its agro-chemical peer United Phosphorus, IIFL believes this premium is justified, on account of the growth opportunity that Rallis has (driven mainly by domestic market conditions) versus United Phosphoruss overseas markets, which are showing signs of stagnation and the second reason being the sustained improvement in EBITDA margins.
According to IIFL, Rallis India has strong exposure to the domestic market growth opportunity and its role as a complete agro-solutions provider with the launch of its new initiatives; we believe that Ralliss earnings growth potential is comparable to that of other rural plays in India (such as Jain Irrigation). Accordingly, we value the stock at 18x FY12ii EPS, which gives us a target price of 1597, and offers 13 percent upside.