Down over 45% from recent high! This Jhunjhunwala stock just got upgraded to ‘Buy’

The company, with a market capitalisation of more than Rs 3,600 crore as on 30 June, hit a 52-week high of Rs 341.65 on July 16, 2021.

However, Prabhudas Lilladher, in its recent report, upgraded the rating on the stock to ‘Buy’ with a target price of Rs 230, signalling a potential upside of over 23 per cent in the counter, from its previous close of Rs 186.95.

The brokerage house said that with the expectation of normal monsoons over the next few weeks coupled with remunerative crop prices, Rallis India remains hopeful for decent performance in domestic business.

It has trimmed FY23/24E EPS estimates by 16/15 per cent citing pressure on near-term margins. Management stated that the recent correction in raw material prices coupled with high-cost inventory will exert pressure on 1HFY23 margins. However, 4-5 per cent price hikes (as compared to March 2022 levels) will help to partially mitigate the same, it said.

Prabhudas Lilladher believes that enhanced capacities in the export business coupled with a lower base of last year (down 8 per cent YoY in 1QFY22) will likely support growth. It expects revenue growth of 9 per cent YoY in 1QFY23, led by domestic and export growth of 8 per cent and 20 per cent, respectively.

Talking about the seeds business, it said that the demand for cotton seeds was impacted due to the delayed monsoon in Maharashtra, impacting sowing activities and increasing usage of illegal BTcotton seeds. Liquidation of inventories was seen in North India because of better rainfall. However, it remained slow. The next few weeks will be crucial in terms of rainfall and inventory liquidation. While for paddy seeds, the trend is towards selected seeds in certain markets of UP, it added.

Rallis India reported a consolidated loss of Rs 14 crore for the March quarter due to multiple challenges, including in the seeds business. The company had posted a consolidated profit after tax of Rs 8 crore during the corresponding quarter of the previous financial year.

The company’s sales registered a rise of 7.70 per cent to Rs 507.54 crore in the quarter ended March 2022 as against Rs 471.26 crore during the previous quarter ended March 2021.

For the full year, the firm’s net profit declined 28.17 per cent to Rs 164.20 crore in the year as against Rs 228.58 crore during the previous year ended March 2021, reports said.

Promoters held 50.09 per cent stake in the company as of 31 March 2022, while FIIs owned 6.03 per cent, DIIs 16.4 per cent.

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