Management attributed weak set of numbers on account of back-to-back droughts in India, resulting in low farm incomes and persisting difficult market conditions.
Monsoon deficiency has affected both acreage growth and yields. International markets, too, were hit with worst ever drought in Brazil since past 80 years and US farmers down-trading on agro-inputs due to poor commodity prices. Due to these factors, the CRAM and B2B sales in exports were hit hard this quarter.
Rallis India faced tough market conditions both in the domestic and overseas markets for H1FY16. We expect a tough going for Rallis in H2FY16 as well looking at the overall weak farm dynamics locally and globally.
The stock is expected to consolidate with limited upsides over the next two quarters. However, keeping in mind a washout FY16, growth trajectory will look very strong in FY17 even for a normal agri-input season. We change our recommendation to ‘accumulate’ from ‘buy’ on dips with a TP of Rs.250.
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