Rakesh Jhunjhunwala portfolio stock Rallis India soared 4 per cent on Thursday despite the company reporting 18.3% fall in net profit to Rs 67 crore on Tuesday. The Tata Group firm’s revenue, however, rose 16.5% to Rs 863 crore in the quarter ending 30 June 2022, driven by 11.6% price growth and 5% of volume growth. So far this year, Rallis India share price has fallen 22 per cent. Analysts’ views remain mixed on the stock amid short-term challenges including shift in cropping patterns; greater use of illegal cotton seed and less contract-manufacturing demand. Rallis India shares were quoting at Rs 214, up 4.7% on NSE intraday.

Ace investor Rakesh Jhunjhunwala held 1.38 crore shares or 7.14 per cent stake in the agrochemicals firm, while his wife Rekha held 51 lakh shares or 2.67% stake till 30 June 2022.

Should you buy, hold or sell Rallis India shares?

Edelweiss: Reduce
Target price: Rs 208; Upside: 1.4%

Analysts at Edelweiss Securities said that product returns in fungicide, delayed monsoon and influx of illegal cotton seeds have been the key concerns for Rallis India during the Apr-Jun quarter. “We expect FY23 to remain challenging for Rallis. Liquidation of higher priced inventory is likely to keep margins under pressure. That said, prospects of a good monsoon augurs well for the domestic crop care segment. Even so, challenges across the seed vertical may dent profitability owing to delayed sowing in the kharif season,” they said. Going forward, the brokerage expects Rallis to underperform its peers. “The company relies heavily on China for key inputs, and we believe its margins would continue to be under pressure. Edelweiss maintains ‘Reduce’ rating on the stock with a target price of Rs 170 per share.

Anand Rathi: Buy
Target price: Rs 260; Upside: 26%

Rallis’ management has stated that challenges in its seeds business would continue and it is focusing more on liquidation, cost optimisation, the product pipeline and scaling up operations in vegetable seeds. However, it is positive on export demand and continues to work on augmenting its portfolio. Brokerage firm Anand Rathi Share and Stock Brokers maintains its ‘Buy’ rating on the stock with a target price of Rs 260, valuing the stock at 20x FY24e earnings. Failure to diversify to a non-kharif range of seeds; greater use of illegal herbicide-tolerant cotton seed; monsoon dependence; delay in launching products; and slowdown in R&D remain the key downside triggers.

IIFL Securities: Buy
Target price: Rs 240; Upside: 17%

According to analysts at IIFL Securities, Rallis was able to protect margins in the crop care business, led by timely price hikes across domestic and exports businesses. The management expects healthy buoyancy in exports. There is still limited visibility on the offtake of the CRAMS business. The seeds business continues to face challenges, as illegal HTBt cotton seeds continue to be a problem, according to analysts. “Ongoing capex will be largely completed in 2HFY23. Our continued positive bias on the stock remains predicated on an expectation of scale-up in the exports business. Valuations are reasonable,” they said. The brokerage maintains a ‘buy’ call on the stock with a target price of Rs 240, implying 17% upside.

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