Up, Up And Away

With a fantastic set of numbers in FY09, impressive capex plans, FY09 dividend of 16 per cent resulting in a high dividend yield of 3 per cent, huge cash reserves of Rs 117 per share and the attractive valuations formed the basis for our having recommended  Rallis India (RIL), one of the most impressive turnaround cases in recent years. A leading agro chemical company, RIL was recommended in the Choice Scrip column in our issue dated April 27, 2009 at a price of Rs 526.20. Post our recommendation the scrip has performed quite well and touched a high of Rs 888, thus providing overall appreciation of 69 per cent. At its CMP of Rs 833.35, the appreciation is still better at 58.37 per cent. And this looks good considering the fact that the Sensex during the same period has appreciated only by 14 per cent, thereby indicating the outperformance of Rallis India vis-a-vis the broader market.

Moreover, the company has managed to put up a good show in the Q1FY10 quarter wherein its bottomline grew by 122 per cent to Rs 9.42 crore despite the 5 per cent dip in sales. The stronger bottomline was on account of better cost management by the company. However, a factor to be kept in mind is that RIL is basically into the crop protection business. Therefore, though the second and third quarters have been strong for RIL, but the shortfall in rains this year across India leads to the probability that the results of the coming quarters might be affected.

We have already seen the first quarter sales dipping marginally, which may be an indication of things to come. Hence it is better to make the most of the appreciation in the scrip and book profits.