Coromandel Intl falls 10% on profit-taking post gaining 17% in 1 month

Analyst believe the company should benefit from debottlenecking of the phosphoric acid plant as well as from an increased share of newly-launched, high margin, crop-protection products in FY23.

Shares of Coromandel International dipped 10 per cent to Rs 875.95 on the BSE in Wednesday’s trade on profit booking after the  board approved voluntary liquidation of its wholly-owned subsidiary Sabero Europe B.V.

The board on May 25, 2022, approved voluntary liquidation of Sabero Europe B.V., a wholly-owned subsidiary of the company in the Netherlands, as per the applicable laws of the Netherlands. The said subsidiary is not a material subsidiary of the company, Coromandel said in an exchange filing.

Sabero Europe B.V., which is the wholly-owned subsidiary of the company in the Netherlands, has not been carrying out any business operations, and has no plan to undertake any business operation in future, the company said.

At 02:21 pm; the stock traded 8 per cent lower at Rs 893, as compared to 0.22 per cent decline in the S&P BSE Sensex. The stock had hit a record high of Rs 1,003 on May 9, 2022.

Meanwhile, in the past one month, the stock has outperformed the market by surging 17 per cent till yesterday, after Coromandel reported better than expected operating performance despite rising input costs, on the back of backward integration, control on fixed costs, price increases, better outsourcing of raw material, and better capacity utilization.

The company reported 20 per cent year on year (YoY) growth in its standalone earnings before interest, taxes, depreciation, and amortization (ebitda) of Rs 272 crore. Profit after tax grew 17 per cent YoY at Rs 156 crore, on back of 50 per cent rise in total income at Rs 4,294 crore over the previous year quarter.

Coromandel International is the largest private sector phosphatic fertiliser manufacturer in India. Company is one of the biggest beneficiary in the complex fertiliser space in India with the implementation of the nutrient based subsidy (NBS) scheme.

While input cost headwinds are likely to persist in the medium term, analyst at HDFC Securities believe the company should benefit from debottlenecking of the phosphoric acid plant as well as from an increased share of newly-launched, high margin, crop-protection products in FY23.

Coromandel continues to focus on backward integration of phosphoric acid and sulphuric acid, which would help maintain profitability in the coming quarters. In Crop Protection, four new products in the domestic market and three new molecule launches in technicals would drive growth. Timely payout of subsidies by the government has significantly reduced working capital and boosted free cash flows along with significant reduction in debtors for the company, the brokerage firm said in its result update.

Analyst feel that Investors can buy the stock in the band of Rs 926-938 and add further on dips to Rs.839 (13x FY24E EPS) for base case target of Rs 1032 (16x FY24E EPS) and bull case target of Rs 1096 (17x FY24E EPS) over the next 2 quarters.