Synopsis:
Nuvama sees a potential downside of 43 percent from its current level as it believes the business has reached its maximum potential.
The shares of this leading Tata Group-backed chemical company are in focus after leading brokerage Nuvama has flagged a downside potential of 43 percent, citing several risks. In this article, we will dive more into the details.
With a market capitalization of Rs 6,874 crores, the shares of Rallis India Ltd are currently trading at Rs 353 per share, very close to its 52-week high of Rs 385.75 per share. Over the past five years, the stock has delivered a return of 24 percent.
Nuvama Institutional Equities has maintained its Reduce rating on the stock, but has increased its price target to Rs 202 per share from Rs 182 per share. This signals that the stock can further decline by 43 percent from its current level.
Nuvama highlighted that Rallis India had a solid performance in Q1FY26, because of a promising start to the Kharif season. All three major segments, Domestic B2C, Domestic & International B2B, and Seeds, experienced robust double-digit growth.
However, the brokerage cautioned that the stock appears to be fully priced with limited room for growth and pointed out the risks of unsold inventory not being cleared in Q2, which could affect volumes.
While nine new products were introduced, most are Kharif-focused, and hitting the targeted 15–20% margin range might be challenging during the weaker Rabi season. Nuvama has increased its EPS estimates for FY26E and FY27E by 6.2 percent and 6.5 percent, respectively, and has adjusted valuations to FY28E.
Financial Highlights
Rallis India reported a revenue growth of 22 percent to Rs 957 crores in Q1 FY26 from Rs 783 crores in Q1 FY25. Its net profit surged by 98 percent to Rs 95 crores in Q1 FY26 from Rs 48 crores in Q1 FY25.
The stock delivered an ROE and ROCE of 6.65 percent and 10.12 percent, respectively, and is currently trading at a P/E of 40.13x as compared to its industry average of 38.18x.
Rallis India Limited, a part of Tata Chemicals, stands out as a top player in the agri-input sector. They specialize in creating and selling a variety of crop protection products, including insecticides, herbicides, and fungicides, along with fertilizers and seeds.
Beyond that, they also provide household insecticides, animal nutrition solutions, and contract manufacturing for agrochemicals and specialty chemicals. The company is dedicated to enhancing soil and plant health, distributing its products through a vast network of dealers and retailers both in India and internationally.
Written by Satyajeet Mukherjee
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