MOSL: COROMANDEL INTERNATIONAL (Buy)-Strong performance-better monsoon to aid growth
​Coromandel International: Strong performance; better monsoon to aid growth
(CRIN IN, Mkt Cap USD1.1b, CMP INR449, TP INR523, 16% Upside, Buy)
- Exhibits recovery in PAT: CRIN reported overall revenue of INR22.7b (est. of INR22.2b) in 1QFY18, as against INR20.6b in 1QFY17, marking growth of 10.6%. EBITDA margin expanded significantly by 320bp YoY in 1QFY18 to 7.5% (est. of 4.6%) on account of gross margin expansion of 240bp YoY. EBITDA increased 94% YoY to INR1,715m (est. of INR1,025m). Consequently adj. PAT grew from INR75m in 1QFY17 to INR754m (est. of INR364m) in 1QFY18 on account of significant reduction in finance cost (INR441m v/s INR651m in 1QFY17).
- Better monsoon aids crop acreages: The country is witnessing better monsoon in 2017 (southwest monsoon 5% above normal level), leading to an increase of 3% in sowing of Kharif crops. Cotton sowing increased impressively by 29%, followed by pulses (+6.9%) and rice (2.4%). CRIN is set to benefit from better monsoon and increased sowing.
- DBT rollout to prove beneficial: Rollout of direct benefit transfer (DBT) for fertilizers has been pushed to 2018 as distribution of POS machines has not been completed yet due to low availability. However, once implemented, it will significantly ease the subsidy receivables situation for CRIN. DBT rollout is expected to require end-to-end supply chain management and last mile reach, both of which will benefit CRIN on account of the strong brand pull.
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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