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We believe Coromandel offers one of the best plays on Indian fertilizers with its strong
distribution, efficient manufacturing and material linkages. The company's new joint venture and
Sabero acquisition could drive the next leg of growth for the medium to long term. We initiate with
a Buy rating and a Rs365.00 TP.
Market leader in phosphatic fertilisers
Coromandel is the market leader in private sector in the phosphatic fertilisers business. In an
essentially low-margin business, CIL has generated high profitability through material sourcing
tie-ups, efficient manufacturing and strong distribution. CIL was possibly the biggest beneficiary of
NBS in phosphatics as margins expanded in FY11. The stock also was rerated as the new
regime allowed pricing flexibility.
Next level of growth will likely depend on sourcing material
CIL has a joint venture in Tunisia to manufacture phosphoric acid, which has been delayed due to
the geopolitical situation there. This JV should enable CIL to expand capacity in India and hence
grow volumes. Until it ramps up, volume growth could be at risk.
Sabero Organics acquisition could take time to yield results
CIL acquired a 42% stake in Sabero in May 2011 in order to gain entry into the global agrochem
space. The global agrochem industry requires time and money to procure product registrations
and CIL is unlikely to see significant value accretion from this acquisition in the near team.
We expect FY12 to be tepid but believe the stock offers good value at current price
We expect some volume decline in FY12 due to a drop in volumes of traded fertilisers, but
EBITDA margins should be maintained. Over FY11-13, we expect EPS CAGR of 19%. The stock
has corrected from its peak, and offers good exposure as a quality fertiliser play in India, in our
view. Our target price of Rs365 is based on 13x FY13F EPS, a level in line with other Indian
fertiliser companies, based on Bloomberg consensus.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We believe Coromandel offers one of the best plays on Indian fertilizers with its strong
distribution, efficient manufacturing and material linkages. The company's new joint venture and
Sabero acquisition could drive the next leg of growth for the medium to long term. We initiate with
a Buy rating and a Rs365.00 TP.
Market leader in phosphatic fertilisers
Coromandel is the market leader in private sector in the phosphatic fertilisers business. In an
essentially low-margin business, CIL has generated high profitability through material sourcing
tie-ups, efficient manufacturing and strong distribution. CIL was possibly the biggest beneficiary of
NBS in phosphatics as margins expanded in FY11. The stock also was rerated as the new
regime allowed pricing flexibility.
Next level of growth will likely depend on sourcing material
CIL has a joint venture in Tunisia to manufacture phosphoric acid, which has been delayed due to
the geopolitical situation there. This JV should enable CIL to expand capacity in India and hence
grow volumes. Until it ramps up, volume growth could be at risk.
Sabero Organics acquisition could take time to yield results
CIL acquired a 42% stake in Sabero in May 2011 in order to gain entry into the global agrochem
space. The global agrochem industry requires time and money to procure product registrations
and CIL is unlikely to see significant value accretion from this acquisition in the near team.
We expect FY12 to be tepid but believe the stock offers good value at current price
We expect some volume decline in FY12 due to a drop in volumes of traded fertilisers, but
EBITDA margins should be maintained. Over FY11-13, we expect EPS CAGR of 19%. The stock
has corrected from its peak, and offers good exposure as a quality fertiliser play in India, in our
view. Our target price of Rs365 is based on 13x FY13F EPS, a level in line with other Indian
fertiliser companies, based on Bloomberg consensus.
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