MOSL: COROMANDEL INTERNATIONAL (Buy)-Sunshine after the rain
COROMANDEL INTERNATIONAL: Sunshine after the rain
(CRIN IN, Mkt Cap USD1.7b, CMP INR406, TP INR524, 29% Upside, Buy)
Manufacturing DAP sales increase led by lower phos acid prices
- According to the Ministry of Fertilizers’ data, Coromandel International’s (CRIN) fertilizer manufacturing volumes grew 8% YoY, whereas trading volumes were down 62% YoY in 2QFY20. Consequently, the company’s overall volumes declined 14% YoY, despite above-average rainfall.
- Manufactured fertilizers entail higher margins than traded fertilizers, and we thus we do not expect a material dent on the company’s second-quarter margins in the fertilizer segment. In fact, we estimate the consolidated EBITDA margin to expand 70bp YoY to 14% as manufacturing volumes increased during the quarter.
- Manufacturing of di-ammonium phosphate (DAP) fertilizers increased 72% YoY, whereas trading of DAP declined steeply by 88% YoY in 2QFY19 due to a fall in phos acid prices. Manufacturing of NPK and single super phosphate (SSP) increased 1% and 14% YoY, respectively.
- In the NPK segment, ‘20-20-0-13’ volumes (41% of NPK volumes in FY19) grew 24% YoY, whereas ‘28-28-0’ volumes (accounted for 22%) declined 10% YoY in 2QFY20. Separately, ‘10-26-26’ and ‘14-35-14’ volumes, which formed 12% each of NPK volumes in FY19, declined by 30% and 14% YoY, respectively.
Coromandel International Limited is engaged in the manufacture and trading of farm inputs consisting of fertilizers, crop protection, specialty nutrients and organic compost. The Company's business divisions include Fertilizers, Specialty Nutrients, Crop Protection and Retail. It offers various products in fertilizer segment, including Nitrogen, Phosphatic and Potassic in various grades. Its specialty nutrients consist of water soluble fertilizer, sulfur products, micro nutrients and organic manure. Its crop protection products consist of insecticides, fungicides and herbicides. Its retail outlets operate as Mana Gromor Centers. It manufactures a range of fertilizers and markets over 3.2 million tons. It operates a network of over 800 rural retail outlets under its retail business across Andhra Pradesh, Telangana and Karnataka. It has manufacturing facilities in Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh, Uttar Pradesh, Rajasthan, Gujarat, and Jammu and Kashmir.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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