Buy Coromandel Inter; target of Rs 343: Unicon Investment

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Buy Coromandel Inter; target of Rs 343: Unicon Investment

Unicon Investment is bullish on Coromandel International and has recommended buy rating on the stock with a target of Rs 343 in its January 24, 2012 research report.

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Unicon Investment is bullish on Coromandel International and has recommended buy rating on the stock with a target of Rs 343 in its January 24, 2012 research report.

"Coromandel International Ltd (CIL) disappointed the street with lower margins in Q3 FY12. Consolidated Revenue jumped 24.4% YoY to INR 25,824mn due to increase in fertiliser prices. Fertiliser volume dropped 1% YoY to 0.8 mn MT due to irregularity in North Eastern monsoons. Sales of complex fertilisers was affected by higher prices as compared to subsidized urea prices. The management has guided on consolidation of Sabero Organics financials from Dec 31, 2011. The company expects a turnaround in its PAT numbers with pick up in capacity utilisation from 30-35% level. EBITDA expanded by 4.6% YoY to INR 2,662mn. EBITDA margin shrunk by 198 bps YoY to 10.4% due to high trading volume and low sales realisations. Purchase of traded goods increased 42% compared to 15% same period last year. Net profit dropped by 13.2% YoY to INR 1,306mn while PAT margin decreased 219 bps to 5.1%. Interest cost increased by 39.3% YoY to INR 304mn in the quarter."

"CIL's acquisition of Gujarat based agrochemical company Sabero Organics would continue to strengthen its topline growth. Sabero has a wide portfolio of 8-9 products across various categories like insecticides, herbicides and fungicides. Strong synergy benefit is expected from this acquisition going forward. CIL's growth trajectory would be further supported by expansion of phosphoric fertiliser capacity in Kakinada and addition of 200 retail stores. Revenue from Kakinada's new capacity is expected to start contribution from H2 FY13. High fertiliser subsidy and fall in global P&K fertiliser prices would continue to boost its consumption in coming quarters. Stock is trading at 10.9x its FY13E earnings. We maintain BUY rating on the stock with a price target of INR 343," says Unicon Investment research report.      

Public holding more than 90% in Indian cos

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To read the full report click on the attachment