Agri input players gain momentum on prospect of an improved Rabi season

Many agri input companies continue to gain momentum with improved rabi season prospects, which is expected to drive their performance. While companies such as PI Industries and Coromandel International trade near their 52-week highs seen recently, others like Rallis have rebounded and are up about 24 per cent from their May lows. There could be more gains in the offing as well.

Improved soil moisture and higher water reservoir levels after a good monsoon provide confidence regarding sowing in the rabi season. Analysts at Reliance Securities believe that the current rabi season would be in stark contrast to that of last year, with improved sowing across key crops and states. 

The major states that contribute to almost two-third of the rabi acreage include Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharashtra and Punjab. Analysts say that reservoir levels have improved in these states, to the extent of 66-99 per cent compared to 58-87 per cent in the year-ago period. In fact, southern and eastern states also are seeing better reservoir levels. The pan-India figure stood at 89 per cent of storage capacity, compared to 66 per cent at the start of last year’s rabi season.

“We expect domestic-focused agrochemical companies to report an improvement in sales momentum,” say analysts at Edelweiss, who believe that given the favourable risk-reward ratio, Dhanuka Agritech and Coromandel International are good bets.

Coromandel’s continued strengthening of its market share in the key fertiliser-consuming states would play in its favour. Reliance Securities believes that Dhanuka Agritech is also set for revival, and its stock is attractively priced. The company had seen its performance getting impacted since the weak rabi season last year, while rising chemical prices had hurt its margins. 

Rallis India’s performance, too, was impacted due to margin pressure, but a strong portfolio for Kharif season provided some respite after the pick-up in monsoon earlier this year. 

Among other companies, PI Industries is expected to be the biggest beneficiary of higher rice acreage in the country. UPL, which has a diversified geographical presence and has been benefitting from the growth momentum in Latin America, despite benign sales in Europe and North America, will get a further leg up as a good rabi season will improve its domestic performance.  

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