PL Stock Report: Coromandel International (CRIN IN) - Q1FY24 Result Update - Decent performance amid challenging times..!! - BUY

Coromandel International (CRIN IN) - Himanshu Binani - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs980 | TP: Rs1,330

Q1FY24 Result Update - Decent performance amid challenging times..!!

Quick Pointers:

§ Confident to maintain EBITDA/MT at Rs5,500-6,000/MT in FY24E.

§ Subsidy outstanding at Rs28.2bn as on June'23 (up Rs0.8bn/4.4bn YoY/QoQ.

We increase our FY24/25E EPS estimates by 4% each, citing better margins in fertilizer business amid a falling RM cost scenario. Coromandel International (CRIN) reported Revenue/EBITDA/PAT growth of -0.6%/+3.5%/flat YoY, better than our and consensus estimates. Subdued revenue growth was largely in line with decline in subsidy rates from the Govt. for 1HFY24 which was partially offset by higher volumes (overall fertilizer volumes were up 20% YoY to 1.27mn mt). Going forward, management remains confident of achieving 6-10% YoY growth in manufactured volumes with sustainable EBITDA/mt within Rs5,500-6,000/MT range largely aided by a) better product mix; b) benefits of backward integration in phosphoric acid, sulphuric acid and rock phosphate and c) better throughput at plants.

We expect CRIN to report stable margins for a longer term backed by a) efficient sourcing of RM's; b) benefits of backward integration; c) rising share of unique grades to overall manufactured volumes; d) product innovation & capacity expansion in both businesses and e) enhanced focus on product branding, both in nutrition and CP segment. Maintain 'BUY' at revised TP of INR1330 (earlier Rs1310) based on 18xFY25E EPS.

§ Achieved decent results amidst a challenging environment: Consolidated revenues at Rs56.9bn flat YoY (down 0.6% YoY) (PLe Rs56.5bn) were largely driven by healthy volume growth of 18% in phosphatic fertilizers despite a dip in realizations led by reduction in subsidy rates by Govt. for 1HFY24. Nutrient and other allied products revenues were up 2% YoY to Rs52.0bn, while crop protection reported revenue decline of 17% YoY to Rs5.5bn. For 1QFY24, overall fertilizer sales volumes were up 20.3% YoY to 1.3 mn mt, led by -10.2%/+59.9%/+13% YoY increase manufactured/marketing/SSP volumes. Derived manufactured EBITDA/MT for 1QFY24 stands at Rs7454/MT. Subsidy and non-subsidy business contribution in Revenue/EBITDA stood at 86%/14% (1QFY23 88%/12%) and 84%/16% (1QFY23, 77%/23%) respectively. Unique grade products contributed 27% of volume in 1QFY24 as against 30% in 1QFY23.

§ Challenges in domestic market drags overall performance in CPC segment: CPC segment reported revenue decline of 17% YoY in 1QFY24 which was largely led by challenges related to a) high channel inventory; b) adverse weather conditions (delayed monsoons this year) and c) pricing pressure in the domestic market. However, exports market posted a growth of 17% YoY in 1Q’24.

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