Thursday, April 26, 2012

Hold Coromandel Int; target of Rs 286


“Coromandel International reported revenues of Rs 27.5bn, 133% yoy marginally above est of Rs 25.6bn. Total fertiliser volumes for the quarter stood at 913000mt (incl. complex & urea imports), while complex fertiliser volumes stood at 733,000mt (incl. imported complex fertiliser excl. MoP). Own manufactured sales increased by 13%yoy to 473,000 mt in Q4FY12. Volume growth is mainly driven by company’s strategy to clear inventory due to drop in subsidy rates effective Apr’12.”

“Coromandel reported EBITDA of Rs 1.7bn, 150% yoy marginally lower than est due to lower margins of 6.1% against est of 7.0%. EBITDA has been adjusted for Rs 100mn loss on sale of fertiliser bonds. Despite EBITDA being marginally lower than est, APAT of Rs 770mn is significantly lower than est of Rs 1.05bn due to higher interest outgo & lower other income. Interest cost increased by 130%yoy to Rs 504mn due to increase in working capital loans. AEPS for the quarter stood at Rs 2.7 against est of Rs 3.7. Aggressive inventory clearance is followed by higher trade discounts and extended credit periods offered to debtors. It has adversely affected working capital requirement with increase in shrot term borrowings and debtors. With higher interest cost, we have tweaked our est for FY13 downward by 5%.”

“Though the company has posted strong topline growth this quarter due to aggressive inventory clearance, we remain cautious with expected pressure on topline growth in subsequent quarters. Availability of phos acid still remains a concern while price negotiation for phos acid is yet to be finalised for FY13. With pressure on agrochemicals business (Sabero Organics) we maintain HOLD rating with target price of Rs 286,” says Emkay Global Financial Services research report.

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