Earnings Miss: Rallis India Limited Missed EPS By 7.3% And Analysts Are Revising Their Forecasts

As you might know, Rallis India Limited (NSE:RALLIS) last week released its latest interim, and things did not turn out so great for shareholders. Results look to have been somewhat negative - revenue fell 4.2% short of analyst estimates at ₹14b, and statutory earnings of ₹8.99 per share missed forecasts by 7.3%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Rallis India

Taking into account the latest results, the consensus forecast from Rallis India's 16 analysts is for revenues of ₹24.0b in 2021, which would reflect a satisfactory 5.9% improvement in sales compared to the last 12 months. Statutory per share are forecast to be ₹10.80, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of ₹25.0b and earnings per share (EPS) of ₹11.58 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.

The analysts made no major changes to their price target of ₹286, suggesting the downgrades are not expected to have a long-term impact on Rallis India's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Rallis India at ₹350 per share, while the most bearish prices it at ₹173. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Rallis India's revenue growth is expected to slow, with forecast 5.9% increase next year well below the historical 7.8%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 16% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Rallis India.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Rallis India. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Rallis India going out to 2023, and you can see them free on our platform here..

You can also see our analysis of Rallis India's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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