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Prabhudas Lilladher
Coromandel Intl (Reduce)
Target: ₹700
CMP: ₹730
Coromandel International has reported mixed results with topline flat at ₹2,850 crore y-o-y (Prabhudas Lilladher’s expectation was 8 per cent degrowth), but EBITDA declined 33 per cent at ₹260 crore (expectation was ₹360 crore) driven by RM cost inflation. The company became net cash due to robust cash generation led by healthy performance in FY21, higher inflow of subsidy (received ₹5,000 crore in FY) and lower working capital driven by 34-day decline in receivables. CP segment clocked healthy topline growth, but margins were under marginal stress due to pricing pressure from international geographies.
The segment continues to be on structural growth trajectory driven by rich product pipeline, expanding geographical presence and focus on expanding registrations.
In FY22, we believe higher raw material cost will continue to be a concern as Coromandel International (& industry) may take sharp price increase to defend margins, yet lower pending subsidies and surplus cash will eventually aid profit (due to lower interest cost and higher other income). We reduce our EBITDA estimates by 1 per cent/1.5 per cent for FY22/FY23 respectively, roll over to FY23 earnings and increase our target price to ₹700 (Previous ₹675).
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