Stocks

Broker's call: Coromandel Intl (Reduce)

| Updated on May 03, 2021

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).

Published on May 03, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.