Agri Input & Chemicals results preview for Q3FY12: Emkay

• On an aggregate basis, we expect our universe to report topline growth of 28% and APAT growth of 17% for Q2FY12.
• EBITDA margin for our universe is likely to contract by 200bps yoy/250bps qoq to 14.7%.
• Fertiliser revenues for our revenues are expected to increase by 31% yoy while we expect margins to decline by 94bps yoy. On the chemicals side, we expect chemicals revenues for our universe to increase by 14% while margins are expected to decline by 400bps yoy
• Decontrolled fertiliser sales (includes DAP, MOP and other NPK fertiliser) increased by 7% in Oct - Nov 2011 after decline of 11% in H1FY12. We attribute the improvement in volumes witnessed during the last 2 months is primarily because of increase in trading volumes (with the resumption of MoP imports) as well as increase in production of low nutrient complex fertilizers (NPK fertilizers) due to limited availability of phos acid.
• During the quarter, we have downgraded our earnings estimates for Coromandel and Rallis and subsequently downgraded these stocks from BUY to Hold. We believe decline in food grain prices have affected farmers’ profitability and is likely to put pressure on agri input consumption in the near future
• We believe complex fertiliser players will be comparatively more impacted than the urea players (refer our note- Agri Sector update of Dec 28, 2011) while in agrochemicals, domestic based players are likely to be impacted more than the export based players. Consequently, we prefer Chambal (urea based) over Coromandel (complex fertiliser pure play) while in agrochem, we prefer UPL (agrochem exports) over Rallis India (domestic focus)

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