Coromandel International - Inline Quarter, Optimistic Outlook; Result Update Q3FY15 :: Edelweiss

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Coromandel International (Coromandel) reported in line consolidated Q3FY15 sales, EBITDA and PAT of INR29.6bn, INR2.2bn and INR1.2bn, respectively. Key positives were: (i) normalised channel inventory in non-urea fertilizers; (ii) commendable performance by Sabero; (iii) non-subsidy business contributed 18% and 37% to sales and EBITDA, respectively; and (iv) interest cost dipped ~25% YoY and QoQ. Key negatives included: (i) subdued non-urea fertiliser volumes owing to poor demand and production loss at Vizag plant due to the Hudhud cyclone; and (ii) EBITDA fell by 80bps YoY on higher input cost, primarily ammonia. However, ammonia prices started softening towards end of the quarter. Management believes improved capacity utilisation following revival in demand and rising penetration will help improve profitability. We anticipate receding concerns on excessive inventory to spur volumes. EBITDA margin of fertiliser business is expected to improve led by better operating leverage on higher plant utilisation. We are rolling our TP to FY17E EPS.

Volume loss, higher ammonia cost impacted performance

Consolidated sales, EBITDA and PAT grew 7.5%, (2.6%) and 11.7% YoY, respectively. Overall volume declined ~3% YoY on volume loss at Vizag plant due to the Hudhud cyclone and subdued demand resulting from adverse weather conditions. The unprecedented surge in ammonia prices during the quarter impacted EBITDA margin. However, ammonia started softening towards end of the quarter. Interest cost fell ~25% YoY and QoQ on lower debt owing to reduced subsidy receivables. PAT stood at INR1.2bn for the quarter.

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https://www.edelweiss.in/research/Coromandel-International--Inline-Quarter,-Optimistic-Outlook;-Result-Update-Q3FY15/28148.html