MOSL: COROMANDEL INTERNATIONAL (Buy)-Multiple factors at play in nourishing the operating performance

Coromandel International: Multiple factors at play in nourishing the operating performance; Rising share of unique grades bodes well

(CRIN IN, Mkt Cap USD1.8b, CMP INR424, TP INR557, 31% Upside, Buy)

• In-line revenue; higher-than-anticipated interest cost contains PAT: CRIN's revenue increased 11.8% YoY to INR25,285m (est. of INR25,563m) in 1QFY19. EBITDA grew 26.3% YoY to INR2,139m (est. INR2,019m), with the margin expanding 100bp YoY to 8.5% (est. of 7.9%). Adj. PAT of INR902m (+24.2% YoY) was below our estimate of INR973m, primarily on account of higher-than-anticipated interest cost (INR644m v/s est. of INR410m) and lower-than-anticipated other income (INR88m v/s est. of INR125m).
• Strong operational performance led by price hikes: CRIN benefited from multiple levers in 1QFY19, which collectively aided in an improved operational performance. Healthy sales growth was aided by multiple price hikes (DAP price increased ~25% to INR26,600/MT) in spite of volume de-growth of 7%. The margins were further aided by operational efficiency at both plant and logistical level, better sourcing of raw materials, and an increase in the share of unique grades. Revenue from unique grades increased 29% YoY in 1QFY19, with its share rising to 30% (v/s 25% in 1QFY18). CRIN expects to further increase its share of unique grades from 38% in FY18 to 43% in FY19.