Prabhudas Lilladher's research report on Coromandel International
We trim our FY24/25E EPS estimates by 5%/4% and target price to Rs1310 (earlier Rs1350) citing normalization of EBITDA/mt to be led by reduction in NBS rates from Govt. for the upcoming kharif season amid a falling RM cost scenario and lower benefit of backward integration. This coupled with higher marketing volumes is likely to exert pressure on the overall fertilizer margins. Coromandel International (CRIN) reported Revenue/EBITDA/PAT growth of 30%/6%/-10% YoY were lower than our and consensus estimates. Healthy revenue growth was on the back of superior realizations and higher volumes (overall fertilizer volumes were up 42% YoY to 1.2mn mt) offset by lower profitability as the company has already accounted for lower subsidy income considering downward revision in NBS rates from Govt. in 4QFY23. Going forward, management remains confident of achieving 6-10% YoY growth in manufactured volumes with sustainable EBITDA/mt within Rs5,500-6,000/MT range largely aided by a) better product mix; b) benefits of backward integration in phosphoric acid, sulphuric acid and rock phosphate.
Outlook
We expect CRIN to report stable margins for a longer term backed by a) efficient sourcing of RM's; b) benefits of backward integration; c) rising share of unique grades to overall manufactured volumes; d) product innovation & capacity expansion in both businesses and e) enhanced focus on product branding, both in nutrition and CP segment. Maintain 'BUY' at revised TP of INR1310 (earlier Rs1350) based on 18xFY25E EPS.
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