Coromandel International- Acquisition of Sabero to drive synergies: Emkay

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Coromandel International

Acquisition of Sabero to drive synergies

BUY

CMP: Rs 317                                       Target Price: Rs 435

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n     Coromandel announced acquisition of Gujarat based agro chemical player - Sabero Organics, with investment of Rs 4.7 bn for 73% stake (42% promoters’ and 31% via open offer)

n     Valuations at EV / EBITDA of 14.6x, EV/Sales of 1.7x at deal price of Rs 160 / share (78% premium to yesterday’s close) do not mirror true potential due to poor FY11 results

n     Sabero’s large portfolio of active ingredients (backward integrated) to support Coromandel’s strong presence in formulations and drive synergy benefits

n     Acquisition to also give Coromandel an opportunity to enter into exports markets. We view this acquisition positive for Coromandel and maintain our BUY recommendation