EUR 120.00 For Business Accounts Only

MOSL: COROMANDEL INTERNATIONAL (Buy)-Higher manufacturing volumes support margins

Coromandel International: Higher manufacturing volumes support margins, for another quarter

(CRIN IN, Mkt Cap USD2.6b, CMP INR632, TP INR736, 16% Upside, Buy)

 

• 3QFY20 revenues grew 8% driven by higher manufacturing volumes (+33% YoY), which in turn led to 42% YoY growth in EBITDA. PAT grew 71% YoY on the back of the lower tax rate and interest cost.
• While revenue was in line during the quarter, beat of 14%/18% in EBITDA/PAT, led to increase in earnings estimates by 9%/8% for FY20/FY21. 

In-line revenue; EBITDA and PAT beats estimates

• Revenue grew 8% in 3QFY20 with overall fertilizer volumes growing a mere 6% due to 44% decline in trading volumes; however, 33% growth in manufacturing fertilizer volumes led to a sharp 320bp EBITDA margin expansion to 13.2%.
• Nutrient and other allied segment revenues grew 8% YoY (to INR28.4b) with 360bp EBIT margin expansion (to 12.8%), due to higher manufacturing volumes. CRIN has contracted phosphoric acid at USD590/MT for 4QFY20 (v/s USD625/MT in 3QFY20). According to our calculations, in 3QFY20, EBITDA/MT for manufacturing fertilizer stood at INR3,845/MT (+16% YoY; -5% QoQ).
• Plant protection revenue grew 4% YoY (to INR4.6b) with EBIT margin contraction of 25bp (to 15.4%) on account of softness in mancozeb prices.
• For 9MFY19, revenue/EBITDA/PAT grew 3%/13%/33% to INR103b/INR13.4b/INR8.3b.