Nov 18, 2017

RALLIS INDIA LTD. Mid & Long Term View Fundamental Take For Investors 18 November 2017

CMP : 229.

This company having 1500 crore topline and not much to pitch for the bottomline is a Tata Group firm and a subsidiary with 50% plus ownership of Tata Chemical. It is mainly in agrichem business. We are more interested in not value investing but in ancilliary valuation attached to it. Clearly if the company starts showing robust EPS it will be an extra boost and become cause of fast movement in the stock price. Just look at the portfolio of Tata Chem and you will be amazed in how many businesses it is and how many over the counter products and segments it has as well as industry facing production capacity it delivers in varied chemical segments and subsegments. It has brand products ranging from tata salt (that too of four types), spices, an RO machine, several brand name products in agri fertilizer and sub space, some other food items apart from spices, cement  (yes!) and so on. We have done a thorough research and even we had previously recommended this stock. We still have a buy call on this stock with a lot upside. The way Cyrus Mistry has turned around and restructured this particular company of Tatas is amazing (poor Cyrus Mistry still sacked!). Anyways, the synergy and underlying relation with Rallis will help Rallis stock (not necessarily the firm may be! Yes, that how stock market works, not alwyas 2+2=4 here!!). Also, the peer groups, the likes of Excel cropcare, UPL, etc are priced much then Rallis.
The stock started upmove in 2009 from 40 Rs. in 2009. It surged a high of Rs.150 in over next three 4 years which is reasonable. Since then in last four years it has not done much except making a high of 250 around and languishing between this 150 and 250 levels which is apt for a relatively unknown firm of India's biggest industrial group in not so fancy business sector. This stock is not for fast returns but definitely for good returns. WE expect the stock will eventually breakout above 260 and some corporat development will make it sustain the upmove and further investing interest shall give the stock a nice bull market rally towards 500 plus. Time horizons etc...? for members only.
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