Buy Coromandel International; target of Rs 1155: Sharekhan

Sharekhan's research report on Coromandel International

Q1FY24 consolidated PAT of Rs. 494 crore (down 1% y-o-y) was 15% above our estimate, led by strong revenues/margins of the nutrient and other allied segments, which offset continued weakness in CPC business amid high channel inventory, pricing pressure and delayed monsoons. Segmental margins were a mixed bag as EBIT of nutrients and other allied segments grew by 12% y-o-y to Rs. 672 crore led by volume growth and sustained per tonne fertiliser margin. However, the CPC business disappointed with a steep 17% y-o-y fall in revenue to Rs. 547 crore and 309 bps y-o-y contraction in EBIT margin to 10%. Input cost pressure subsided and the management expects full-year fertiliser margin to sustain at Rs. 5,500-6,000/tonne. Focus on new business stream i.e. specialty chemical/CDMO and future technology (drone for agrochemical space) and innovative products (Nano-DAP by Oct’23), strong margin for fertilizers makes us constructive on growth prospects.

Outlook

We maintain a Buy on Coromandel with an unchanged PT of Rs. 1,155, given healthy earnings growth outlook and reasonable valuation of 11.5x FY25E EPS. Focus on CDMO and specialty chemical is a right step and could drive meaningful growth in the medium to long term apart from ssssstrong contribution core fertilizer/CPC business.