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In the concall, management indicated that DAP prices were hiked to Rs18200/T (+30%) in end
Sep, which should keep margins high for 2H. However, supply issues remain especially from
Tunisia. Too early to say if demand is impacted on higher price.
Volume decline 8% yoy due to supply constraints
Phos acid supplies were constrained from Tunisia and MOP, DAP imports were delayed
leading to 8% decline in overall volume in 2Q.
While DAP imports have picked up in Sep, Tunisian supplies continue to be unpredictable,
with the fluid political and economic situation there.
Good sowing should help demand growth
Management was optimistic that price hikes in DAP/ complex would be absorbed by market
given the growth in acreages.
The price hike would help to maintain margins, as costs had gone up 10-15% from rupee
depreciation, and higher contract prices for 3Q.
Margins at very high levels, but could stay for some time
We estimate that gross margins were at Rs5600/tonne for 2Q, up 24%yoy, and highest in 5
years. Management indicated that they are comfortable with contribution margins of
Rs3000/tonne also. In near term, however, margins could sustain as price hikes are more
than adequate to cover cost increases.
Non fertilizer business continues to grow fast
Number of retail centres up to 545 (vs423 yoy) and 50% centres EBITDA break even, organic
manure volumes up 50%yoy and pesticide sales grew at double market rate despite
endosulfan ban.
Sabero open offer approval likely to come soon. Sabero has got pollution control board
approval for 50% of capacity (vs 25% at takeover time). However, management control is still
not with Coromandel.
Our view: need clearer visibility on volume growth
The margin outlook is good in 2H given price hikes, and our FY12 estimates could have
upside. However, volume visibility for FY13 is still poor, and we believe stock will need
volume visibility to sustain outperformance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In the concall, management indicated that DAP prices were hiked to Rs18200/T (+30%) in end
Sep, which should keep margins high for 2H. However, supply issues remain especially from
Tunisia. Too early to say if demand is impacted on higher price.
Volume decline 8% yoy due to supply constraints
Phos acid supplies were constrained from Tunisia and MOP, DAP imports were delayed
leading to 8% decline in overall volume in 2Q.
While DAP imports have picked up in Sep, Tunisian supplies continue to be unpredictable,
with the fluid political and economic situation there.
Good sowing should help demand growth
Management was optimistic that price hikes in DAP/ complex would be absorbed by market
given the growth in acreages.
The price hike would help to maintain margins, as costs had gone up 10-15% from rupee
depreciation, and higher contract prices for 3Q.
Margins at very high levels, but could stay for some time
We estimate that gross margins were at Rs5600/tonne for 2Q, up 24%yoy, and highest in 5
years. Management indicated that they are comfortable with contribution margins of
Rs3000/tonne also. In near term, however, margins could sustain as price hikes are more
than adequate to cover cost increases.
Non fertilizer business continues to grow fast
Number of retail centres up to 545 (vs423 yoy) and 50% centres EBITDA break even, organic
manure volumes up 50%yoy and pesticide sales grew at double market rate despite
endosulfan ban.
Sabero open offer approval likely to come soon. Sabero has got pollution control board
approval for 50% of capacity (vs 25% at takeover time). However, management control is still
not with Coromandel.
Our view: need clearer visibility on volume growth
The margin outlook is good in 2H given price hikes, and our FY12 estimates could have
upside. However, volume visibility for FY13 is still poor, and we believe stock will need
volume visibility to sustain outperformance.
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