Sharekhan's research report on Coromandel International
For Q1FY2022, Coromandel International Limited’s PAT stood at Rs. 338 crore, up 34.8% y-o-y, and was 19% above our estimate, led by beat in OPM at 13.2% and higher other income. Revenue growth of 14% y-o-y was marginally above our estimate of 12.6% y-o-y growth. Strong margin performance was led by higher gross margin at 30.7% (up 170 bps and beat of 211 bps versus our estimate), supported by sharp hike in fertiliser subsidy on DAP, inventory gains, and benefit of backward integration. Fertiliser margin guidance of Rs. 4,000-4,250/tonne is encouraging (given high RM price) and would be aided by backward integration and recent price hike taken for some NPK grades. Double-digit growth outlook for CPC business to be supported by new generation products (launched six new products in June 2021 with one 9/(3) product registration).
Outlook
We retain our Buy rating on the stock with an unchanged PT of Rs. 1,070, as decent fertiliser margin (focus on NPK), and strong growth in the CPC business would drive a 15% PAT CAGR over FY2021-FY2024E with high RoE of 24%. Potential inorganic growth could further aid to growth. The stock trades at 14.7x/12.8x its FY2023E/FY2024E EPS.
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