Motilal Oswal is bullish on Coromandel International has recommended buy rating on the stock with a target price of Rs 738 in its research report dated May 11, 2020.
Motilal Oswal 's research report on Coromandel International
Coromandel International (CRIN)’s key markets are Andhra Pradesh (AP), Telangana, Maharashtra, Karnataka, West Bengal, and Odisha. These six states account for 94% of CRIN’s NPK/DAP volumes and 84% of its overall volumes. Key crops grown in the regions mentioned above include paddy, pulses, cotton, soybean, and maize. Thus, the acreage movement in the above crops would have a bearing on CRIN’s performance. Prices of paddy (down 9% YoY) and soybean (flat YoY) have remained firm (relatively); thus, the sowing of these crops is likely to continue at similar levels in the upcoming kharif season, particularly in the southern region. However, cotton prices (20% down YoY) have plummeted due to the current crisis; hence, farmers may shift to alternate crops such as groundnuts (up 7% YoY) and soybean. The key reason for the shift from cotton to this crop could also be attributable to lower yield in the previous season due to a pink bollworm infestation and excess rainfall.
We have ascribed a 17x PE multiple (in-line with the five-year average multiple) and arrived at TP of INR738. Maintain Buy.
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