With high demand of food services in the country right now amid lockdown, the agrochemical space is flourishing again with one of its top gainers in trade being Rallis India.

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The stock has jumped 86 percent from its March lows. In fact, it is trading close to its 52-week high now. Also, in the calendar year 2020, the stock has already outperformed the market by rallying 32 percent.

Being one of the oldest players in the space offering pesticides, plant nutrients and hybrid seeds, this Tata group-owned smallcap company is suddenly under the limelight especially after Rakesh Jhunjhunwala's 'big buy'.

The ace investor acquired an additional 2,75,000 shares of Rallis India, thus increasing his total stake to nearly 10 percent. As per the shareholding data, Jhunjhunwala held 9.93 percent stake in the March quarter as compared to 9.79 quarter in the previous quarter.

Not just that, even foreign portfolio investors and several other mutual funds have upped their stake in Rallis. FPI's holdings have increased to 4.81 percent from 4.41 percent in December quarter while MF's stake in the company rose to 15.01 percent from 13.6 percent earlier.

In the October-December quarter last year, Rallis India reported strong earnings with a 146 percent YoY jump in the consolidated profit before tax at Rs 48 crore. Consolidated revenue rose 28 percent YoY at Rs 534 crore.

For FY21, the company has laid out a 5 year capex plan of Rs 800 crore investments to expand intermediates and formulations capacity, said Nirmal Bang.

It also said that these investments are earmarked for backward integration and CRAMS opportunities. Of this, Dahej chemical plant’s progress is on track and production is expected to commence in FY21.

Since IMD has predicted a normal monsoon this year, the brokerage believes it will be a profitable year for the agrochemical space and farmers. Therefore, the brokerage expects the stock to report revenue growth of 12.5 percent YoY with net profit growth at 9.1 percent in FY21E.

In its earnings preview of Q4FY20, Dolat Capital said that Rallis' international business is expected to out-grow the domestic business. Expect it to grow sales/EBITDA/PAT by 18/273/758.4 percent YoY to Rs 400 crore/Rs 25.4 crore/Rs 13 crore respectively.

First Published:May 6, 2020 10:59 AM IST