Target: ₹2,103
CMP : ₹1,813
Coromandel International has reported better-than-expected Q3 across all parameters. Topline outperformance was led by 13 per cet higher-than-expected volume growth in the P&K fertilizer segment at 1.13 million tonnes.
Non-subsidy business grew 13 per cent y-o-y. EBITDA grew 102 per cent to ₹720 crore, led by 2.8x growth in EBITDA from subsidy business to ₹500 crore. Profitability was bolstered by higher volume growth and spiked production of phosphoric acid and sulphuric acid (led by resumption at Ennore plant and higher acid prices). EBITDA per tonne rose 209 per cent y-o-y for the subsidy business (all fertilizers except urea considered for calculation).
We remain structurally positive on Coromandel International on the back of aggressive investment plans across business segments, increasing profitability in the core fertilizer business and rising free cashflow (after meeting capex requirement).
Post elevation of Sankarasubramanian at the helm of affairs, growth visibility across all business segments and sub-segments has improved significantly, driven by management’s plan to scale up those segments. While the company continues on the path to achieve these growth targets, cash accumulation will also increase as annual cash generation will outweigh deployments in expansion projects.
We revise Coromandel International to Accumulate from Buy with TP raised to ₹2,103 (from ₹2,041).