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UBS Investment Research
Coromandel International
S trong Q2 beat expectations; reiterate Buy
Strong Q2 reaffirms robust business model
CIL’s pre-exceptional Q2 FY12 PAT was Rs2.63bn (+21% YoY), significantly
ahead of our and consensus forecasts. Q2 was tough in terms of weak demand (flat
to lower volume YoY), volatile FX and constraints in phosphoric acid supply.
Margins were aided by optimised procurement, product mix (more low-phosphoric
and traded products), its strong brand and favourable demand/supply. It should also
address recent concerns about low conversion margins for DAP. The non-subsidy
business continued to grow at a higher than average rate.
Rs15/share special dividend; SSP plant announced in Punjab
CIL announced an Rs15/share bonus debenture (CIL celebrates its golden jubilee
today). This is 60% of our FY12E EPS and at the current share price implies a 5%
yield. It also reflects management’s confidence in cash flow and gives the
company flexibility to retain cash for expansion opportunities. CIL announced a
270,000t SSP project in Punjab, giving growth visibility beyond the next two
years.
We maintain our positive view; the best agri play in India
We reiterate our view that CIL is emerging as a broad agri-inputs company and
remains well-placed to benefit from opportunities in the Indian agri space with its
strategy of increasing the mix of the non-subsidy business (higher margins/lower
regulation) from 28% to 50% of total earnings in two to three years time.
Valuation: Buy rating with a price target of Rs416.00
We value CIL using a DCF-based methodology and our price target implies a
FY13E PE of 13.2x. We assume a WACC of 12.85%.
Coromandel International
Coromandel International is an India-based leading agri-input company. It is the
second largest phosphate fertilizer manufacturer in India and is part of the
US$3bn Murugappa Group. The company manufactures a wide range of
fertilizers, specialty nutrients, and crop protection products (technicals and
formulations). It is in the retail business through its Mana Gromor Centres that
sell agri-input products.
Statement of Risk
We believe the key risks for the company are volatility in foreign currency,
increased competition, weather outlook and changes in the government’s
subsidy policy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Coromandel International
S trong Q2 beat expectations; reiterate Buy
Strong Q2 reaffirms robust business model
CIL’s pre-exceptional Q2 FY12 PAT was Rs2.63bn (+21% YoY), significantly
ahead of our and consensus forecasts. Q2 was tough in terms of weak demand (flat
to lower volume YoY), volatile FX and constraints in phosphoric acid supply.
Margins were aided by optimised procurement, product mix (more low-phosphoric
and traded products), its strong brand and favourable demand/supply. It should also
address recent concerns about low conversion margins for DAP. The non-subsidy
business continued to grow at a higher than average rate.
Rs15/share special dividend; SSP plant announced in Punjab
CIL announced an Rs15/share bonus debenture (CIL celebrates its golden jubilee
today). This is 60% of our FY12E EPS and at the current share price implies a 5%
yield. It also reflects management’s confidence in cash flow and gives the
company flexibility to retain cash for expansion opportunities. CIL announced a
270,000t SSP project in Punjab, giving growth visibility beyond the next two
years.
We maintain our positive view; the best agri play in India
We reiterate our view that CIL is emerging as a broad agri-inputs company and
remains well-placed to benefit from opportunities in the Indian agri space with its
strategy of increasing the mix of the non-subsidy business (higher margins/lower
regulation) from 28% to 50% of total earnings in two to three years time.
Valuation: Buy rating with a price target of Rs416.00
We value CIL using a DCF-based methodology and our price target implies a
FY13E PE of 13.2x. We assume a WACC of 12.85%.
Coromandel International
Coromandel International is an India-based leading agri-input company. It is the
second largest phosphate fertilizer manufacturer in India and is part of the
US$3bn Murugappa Group. The company manufactures a wide range of
fertilizers, specialty nutrients, and crop protection products (technicals and
formulations). It is in the retail business through its Mana Gromor Centres that
sell agri-input products.
Statement of Risk
We believe the key risks for the company are volatility in foreign currency,
increased competition, weather outlook and changes in the government’s
subsidy policy.
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