Buy Coromandel International: target of Rs 1070: Sharekhan

Sharekhan is bullish on Coromandel International has recommended buy rating on the stock with a target price of Rs 1070 in its research report dated April 29, 2022.

Broker Research

April 30, 2022 / 10:13 PM IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Sharekhan's research report on Coromandel International

Q4FY2022 results were strong with 51% beat in PAT at Rs. 290 crore (up 86% y-o-y) due to sharp beat in EBITDA margin and higher other income. Revenue growth was also strong at 50% y-o-y to Rs. 4,227 crore (marginally ahead of our estimates). Revenue/EBIT from nutrients and other allied business grew strongly by 56%/92% y-o-y to Rs. 3,683 crore/Rs. 325 crore; EBIT margin was up 166 bps y-o-y to 8.8%. Crop protection revenue/EBIT up 8%/14% y-o-y, while EBIT increased 67 bps y-o-y. NBS rates for the upcoming Kharif season largely cover raw material cost rise and the same has improved the margin outlook (management has guided for fertiliser margin of Rs. 4,000-4,500/tonne). CPC business to grow at high-teen rates and new products to improve margin.

Outlook

We retain Buy on the stock with an unchanged PT of Rs. 1,070. Cash balance of Rs. 1,753 crore provides scope for inorganic growth and the same could accelerate growth in the CPC business. The stock trades at 15.5x/13.4x its FY2023E/FY2024E EPS.