Coromandel International: ‘Buy’ with TP of Rs 1,030

In this note, we have analysed volume growth for Coromandel International (CRIN) and the fertiliser industry in FY21. Moreover, we have looked at the market share trend, there lease of subsidies, price hikes for DAP/NPKS, & volume performance in 4QFY21. Here are the key insights.

Overall fertilizer industry volumes grew 8% YoY in FY21 on the back of 19% volume growth in MOP; NPKS and SSP volumes grew 17% each for FY21. Urea, which accounted for 53% of the fertiliser industry’s volumes, was up by 5% YoY in FY21. CRIN’s overall fertilizer volumes grew 11% YoY in FY21 on the back of 35%/20%/16% volume growth in urea/MOP/SSP. NPKS volumes were up 8%, while DAP volumes came in flat. CRIN leads the market in the NPKS Fertiliser segment and commands market share of 23.1% (FY21). For CRIN, NPKS formed 58% of overall volumes in FY21 – NPKS grew 8% v/s industry sales volume growth of 17%. Thus, CRIN lost 191bp market share in FY21. The top six states, which cumulatively account for 97% of CRIN’s NPKS volumes, are Andhra Pradesh (33%), Telangana (29%), Karnataka (12%), Maharashtra (11%), West Bengal (8%), and Odisha (4%). Maharashtra – the largest consumer of NPKS in India – accounts for 23% of India’s NPKS consumption. NPKS industry volumes in Maharashtra were up 35%, whereas CRIN’s sales in the state were largely in-line (-2%). Thus, strong NPKS volume growth in states wherein CRIN does not have a significant presence has impacted the company’s overall market share. Additionally, the firm is likely to generate CFO of Rs 41.3b in FY21, aided by the release of subsidies by the government. Thus, the firm’s capex plan would be a key monitorable, in our view. We expect a revenue/EBITDA/PAT CAGR of 8%/10%/13% over FY21–23E. We value CRIN at 17x FY23E EPS to arrive at TP of Rs 1,030. Maintain Buy.