RESULTS REVIEW 2QFY16

28 OCT 2015

Coromandel International
BUY
INDUSTRY

FERTILISER

CMP (as on 28 Oct 2015)

Rs 192

Target Price

Rs 250

Nifty

8,171

Sensex

27,040

KEY STOCK DATA

Bloomberg/Reuters

CRIN IN/CORF.BO

No. of Shares (mn)

291

MCap (Rs bn) / ($ mn)

56/858

6m avg traded value (Rs mn)

47

STOCK PERFORMANCE (%)

52 Week high / low

Rs 353/151
3M

6M

12M

Absolute (%)

(16.2) (20.6)

(39.7)

Relative (%)

(14.7) (19.3)

(40.3)

SHAREHOLDING PATTERN (%)

Promoters

62.11

FIs & Local MFs

7.68

FIIs

5.45

Public & Others

Source : BSE

Satish Mishra
satish.mishra@hdfcsec.com
+91-22-6171-7334
Deepak Kolhe
deepak.kolhe@hdfcsec.com
+91-22-6171-7316

24.76

Bumpy ride continues

Coromandel International (CRIN) reported an EBITDA
of Rs 3.1bn (-10% YoY), led by the non-subsidy
business (-25%). Unfavourable weather conditions
and muted agri-commodity prices put pressure on
pesticides in the domestic and export markets.
Higher other income and lower interest cost
(easing subsidy situation) helped a bit, with PAT at
Rs 1.7bn (-4%).

Maintain BUY with a TP of Rs 250/sh (11x 12 months

rolling forward EPS).

The sale of Coromandels standalone complex

fertilisers was 0.94 mT (+1% YoY). The share of
manufactured fertilisers went down to 83% (vs.
85% YoY) due to unavailability of phosphoric acid.

The near-term outlook remains challenging for CRIN

because of (1) Low water reservoir levels at ~60% of
LPA, (2) Weaker Latin America and European
currencies, (3) Muted agri-commodity prices.

The non-subsidy business contributed 15% and

30% to revenues and EBITDA, respectively. The
business reported a sharp fall of 35% YoY in
EBITDA. Outlook remains challenging owing to
high channel inventory.

Subsidy receivables have come down to Rs 14bn

vs. Rs 18bn in Mar-15.

Risks: (1) Large imports by traders capitalising on

the volatile currency and DAP prices may upset
equilibrium, and (2) Irregular monsoon.

Despite a tough FY16, we see fundamentals

improving for CRIN with (1) Increase in share of
manufactured NPK, which have better margins, (2)
Lower channel inventory of complex fertilisers and
chances of the government addressing the issue of
subsidy receivables. CRIN is our preferred bet given
its attractive valuation and return ratios.

Highlights of the quarter

Financial Summary (Consolidated)

(Rs mn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

2QFY16 2QFY15 YoY (%) 1QFY16 QoQ (%)

35,644 34,660
2.8 21,812
63.4
3,137
3,467
(9.5)
924
239.6
1,735
1,799
(3.6)
145 1,098.8
6.1
6.3
(3.6)
0.5 1,098.8

FY16E
FY14
FY15
FY17E
FY18E
99,863 112,450 121,973 132,555 142,085
7,384
7,920
8,447 10,108 11,221
3,565
4,018
4,315
5,947
6,948
12.6
14.2
15.2
21.0
24.5
15.3
13.5
12.6
9.1
7.8
8.2
8.6
7.6
6.2
5.2
15.9
17.9
18.4
22.4
22.8

Source: Company, HDFC sec Inst Researc

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Quarterly Financials Snapshot (Consolidated)

Decline in EBITDA was led by

pressure in non-subsidy
business

(Rs mn)
Net Sales
Material Expenses
Employee Expenses
Traded Goods
Other Expenses
EBITDA
Other Income
Depreciation
PBIT
Interest
PBT
Tax
PAT
Minority Interest
APAT
E/o items (adj for tax)
RPAT
AEPS (Rs/sh)

2QFY16
35,644
17,211
724
9,863
4,710
3,137
245
282
3,099
497
2,603
868
1,735
1,735
1,735
6.1

2QFY15
34,660
21,964
694
4,232
4,305
3,467
139
264
3,342
601
2,741
911
1,830
31
1,799
1,799
6.3

YoY (%)
2.8
(21.6)
4.4
133.1
9.4
(9.5)
75.6
6.7
(7.3)
(17.4)
(5.0)
(4.7)
(5.2)

QoQ (%)
63.4
48.0
0.7
110.2
22.4
239.6
59.3
7.7
280.1
(17.0)
1,097.8
1,095.9
1,098.8

(3.6)
(3.6)

1QFY16
21,812
11,628
719
4,693
3,849
924
154
262
815
598
217
73
145
145
145
0.5

2QFY16
48.3
2.0
27.7
13.2
8.8
4.9
33.4

2QFY15
63.4
2.0
12.2
12.4
10.0
5.2
33.2

YoY (bps)
(1,508)
3
1,546
79
(120)
(32)
12

1QFY16
53.3
3.3
21.5
17.6
4.2
0.7
33.4

QoQ (bps)
(503)
(127)
616
(443)
457
420
(5)

(3.6)

1,098.8
1,098.8
1,098.8

Source: Company, HDFC sec Inst Research

Margin Analysis

Higher share of trading hit

EBITDA margins

Material Expenses as % of Net Sales

Employee Expenses as % of Net Sales
Traded Goods as % of Net Sales
Other Expenses as % of Net Sales
EBITDA Margin (%)
Net Profit Margin (%)
Tax Rate (%)
Source: Company, HDFC sec Inst Research

Page | 2

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Fertilisers Sold Excluding Liberty Phosphate (000 T)

DAP mfg
DAP imp
DAP total
Other NPK mfg
Other NPK imp
Other NPK total
MOP
SSP
Complex total
Urea
Fertilisers total
Mfg (%) in DAP+NPK

Proportion of manufacturing
fertilisers were low due in
1HFY16 to unavailability of
phosphoric acid

FY13
236
197
433
1,425
184
1,609
80
91
2,213
542
2,755
81%

FY14 1QFY15 2QFY15

586
95
29
42
6
72
628
101
101
1,594
325
720
27
0
1
1,621
325
721
123
16
65
106
23
41
2,477
466
928
834
105
205
3,311
570
1,134
97%
98%
91%

3QFY15 4QFY15
56
83
68
35
123
118
562
571
1
0
563
571
32
41
32
130
750
860
278
435
1,028
1,295
90%
95%

FY15
264
181
444
2,177
3
2,180
154
226
3,004
1,023
4,027
93%

1QFY16
26
130
156
337
0
338
18
21
533
97
629
74%

2QFY16
23
116
139
735
1
736
40
26
941
81
1,022
87%

YoY (%)
(21.6)
61.7
37.5
2.1
(15.2)
2.1
(38.6)
(37.1)
1.4
(60.6)
(9.9)

FY15

FY16E

FY17E

FY18E

20.9
18.7
15.5
1.7

20.9
18.7
15.5
1.7

20.9
18.7
15.5
1.7

20.9
18.7
15.5
1.7

715
550
140
335
140

805
425
150
330
150

805
425
150
330
150

805
425
150
330
150

22,262
19,058
5,644
15,420

22,562
19,358
5,644
15,420

22,562
19,358
5,644
15,420

22,562
19,358
5,644
15,420

Source: FAI, HDFC sec Inst Research

Assumption
Volumes (mT)

FY13

FY14

FY15

FY16E

FY17E

FY18E

Manufactured
NPK
DAP
SSP
Traded
DAP
NPK
MOP
Complex total
YoY Gr (%)
Urea
Fertilisers total
Mfd/total
complex

1.88
1.56
0.23
0.09
0.57
0.23
0.29
0.04
2.45
(16.1)
0.68
3.12

2.31
1.62
0.59
0.11
0.17
0.04
0.00
0.12
2.48
1.2
0.83
3.31

2.95
2.13
0.26
0.56
0.32
0.16
0.00
0.15
3.27
32.1
0.50
3.77

3.20
2.29
0.30
0.60
0.31
0.15
0.00
0.15
3.50
7.0
0.50
4.00

3.46
2.52
0.33
0.60
0.31
0.15
0.00
0.15
3.76
7.4
0.50
4.26

3.68
2.71
0.36
0.61
0.31
0.15
0.00
0.15
3.98
5.9
0.50
4.48

77%

93%

90%

91%

92%

92%

Source: Company, HDFC sec Inst Research

FY13
FY14
Nutrient-based subsidy (Rs/kg)
N
24.0
20.9
P
21.8
18.7
K
24.0
18.8
S
1.7
1.7
Raw Material Price (US$/t)
Phosphoric Acid
890
670
Ammonia
650
470
Rock Phosphate
180
150
MOP
490
427
Sulphur
200
180
Farmgate price (Rs/t)
DAP
22,065 21,865
NPK
18,860 18,360
SSP
6,684
6,584
MOP
14,192 15,692

Building robust growth and high mfg share

Page | 3

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Change In Estimates
(Rs mn)
Revenue
EBITDA
PAT
EPS (Rs/sh)

FY16E Old
123,174
9,363
4,937
17.4

FY16E New
121,973
8,447
4,315
15.2

YoY Gr (%)
(1.0)
(9.8)
(12.6)
(12.6)

FY17E Old
132,834
10,899
6,484
22.9

FY17E New
132,555
10,108
5,947
21.0

YoY Gr (%)
(0.2)
(7.3)
(8.3)
(8.3)

Source: HDFC sec Inst Research

Change in estimates led by:

1) Weaker INR vs. US$
2) Lower margins in non-subsidy
business
Peer Valuations

Chambal Fert
Coromandel Int
PI Industries
Rallis India
UPL
Navin
SRF

CMP
(Rs/sh)
58
192
665
205
474
1,655
1,358

Mcap
(Rs bn)
24.3
54.2
90.8
39.9
203.2
16.2
78.0

Rating
BUY
BUY
BUY
BUY
BUY
BUY
BUY

TP
(Rs/sh )
74
250
800
240
560
1,415
1,425

EPS (Rs/sh)
FY15 FY16E FY17E
7.1
8.7
9.2
14.2
17.4
22.9
17.1
21.3
26.7
8.1
7.6
10.0
26.7
30.1
35.4
55.9
67.0
94.3
52.7
75.9
89.1

FY15
8.2
13.5
39.0
25.4
17.8
29.6
25.7

P/E (x)
FY16E FY17E
6.7
6.3
11.0
8.4
31.2
24.9
27.1
20.5
15.8
13.4
24.7
17.5
17.9
15.2

P/BV (x)
FY15 FY16E FY17E
1.1
1.0
0.9
2.5
2.2
1.9
10.1
8.0
6.3
4.9
4.4
3.9
3.5
3.0
2.5
2.8
2.6
2.3
3.4
3.0
2.6

FY15
13.7
17.9
29.3
20.5
20.6
9.5
13.9

ROE (%)
FY16E
15.1
20.8
28.7
17.1
20.3
10.7
17.7

FY17E
14.3
23.6
28.3
20.1
20.3
13.9
18.1

Source : Company, HDFC sec Inst Research

Page | 4

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Ammonia (US$/T)

Urea (US$/T)

700

450
400

600

350

500

Phosphoric Acid (US$/T)

Sep-15

Jul-15

May-15

Apr-15

Feb-15

Dec-14

Nov-14

Sep-14

Jul-14

Jun-14

Apr-14

Mar-14

DAP (US$/T)

950

700
600

800

500
650

400

Sep-15

Jul-15

May-15

Aug-15
Aug-15

Feb-15

Jun-15
Jun-15

Dec-14

Apr-15
Apr-15

Oct-14

Feb-15
Feb-15

Aug-14

Dec-14
Dec-14

Jun-14

Oct-14
Oct-14

Apr-14

Aug-14
Aug-14

Feb-14

Jun-14
Jun-14

Oct-15

Apr-14
Apr-14

Feb-14

Dec-13

Nov-13

300

500

MOP (US$/T)
600

525
450
375

Oct-15

Feb-14

300
Dec-13

Phosphoric acid prices are

stable despite weakness in
DAP prices

Nov-13

Oct-15

Aug-15

Jun-15

Apr-15

Feb-15

Dec-14

Oct-14

Aug-14

Jun-14

200
Apr-14

300
Feb-14

250
Jan-14

300

400

Dec-13

Ammonia price has

corrected to ~US$ 400/t
and Urea costs ~US$ 260/t

Source: Bloomberg, HDFC sec Inst Research

Page | 5

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Income Statement (Consolidated)

(Rs mn)
Net Sales
Growth %
Raw Material
Traded Goods
Employee Expenses
Other Expenses
Operating Profit
OPM %
Other Operating Income
EBIDTA
EBIDTA Margin (%)
EBIDTA Growth %
Other Income
Depreciation
EBIT
Interest
Exceptional items
PBT
Tax
PAT
Minority Interest
APAT
APAT growth %
APAT (continuing ops)
AEPS
EPS growth %

FY14
99,863
11.3
62,540
12,266
2,705
14,969
7,384
8.0
669
8,052
8.1
4.9
608
961
7,699
2,403
(126)
5,171
1,595
3,576
84
3,565
(17.5)
3,565
12.6
(17.5)

Source: Company, HDFC sec Inst Research

Balance Sheet (Consolidated)

FY15
112,450
12.5
67,010
19,215
2,779
15,526
7,920
7.5
615
8,535
7.6
6.0
566
1,046
8,055
2,096
(39)
5,920
1,902
4,018
4,018
12.7
4,018
14.2
12.7

FY16E
121,314
7.8
71,669
20,783
3,057
16,442
9,363
8.2
615
9,978
8.2
16.9
611
1,076
9,513
2,054
7,460
2,397
5,063
126
4,937
22.9
4,937
17.4
22.9

FY17E
131,965
8.7
79,290
21,002
3,363
17,412
10,899
8.7
615
11,514
8.7
15.4
660
1,118
11,056
1,455
9,602
3,085
6,517
35
6,482
31.3
6,482
22.9
31.3

FY18E
142,517
8.0
86,783
21,386
3,699
18,439
12,210
9.0
615
12,825
9.0
11.4
713
1,160
12,378
883
11,495
3,693
7,802
185
7,617
17.5
7,617
26.9
17.5

(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
TOTAL SHAREHOLDERS FUNDS
Minority Interest
Long-term Debt
Short-term Debt
TOTAL DEBT
Deferred Taxes
LT Provisions & other liabilities
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Goodwill
Investments
LT Loans & Advances
CURRENT ASSETS
Inventories
Trade receivables
Cash & equivalents
ST Loans & Advances
Other Current Assets
TOTAL CURRENT ASSETS
CURRENT LIABILITIES
Creditors
Other Current Liabilities
Provisions
TOTAL CURRENT LIABILITIES
NET CURRENT ASSETS
TOTAL APPLICATION OF
FUNDS

FY14

FY15

FY16E

FY17E

FY18E

283
22,526
22,810
254
2,669
14,043
16,711
1,890
476
42,140

291
21,729
22,020
668
20,393
21,061
1,875
468
45,424

291
25,132
25,423
668
17,393
18,061
1,875
468
45,828

291
29,229
29,520
668
11,893
12,561
1,875
468
44,424

291
34,120
34,411
668
6,393
7,061
1,875
468
43,815

13,858
744
3,483
3,416
777

13,658
600
3
3,520
689

13,482
600
3
3,520
689

13,264
600
3
3,520
689

13,005
600
3
3,520
689

17,529
14,835
4,724
16,542
142
53,771

22,592
14,464
3,178
24,878
36
65,147

23,384
16,703
5,541
23,214
36
68,877

25,426
18,162
5,020
22,653
36
71,297

27,450
19,607
5,081
22,421
36
74,595

27,081
5,071
1,755
33,907
19,863

30,880
6,253
1,060
38,193
26,955

33,405
6,878
1,060
41,343
27,534

36,323
7,566
1,060
44,949
26,348

39,214
8,323
1,060
48,597
25,998

42,140

45,424

45,828

44,424

43,815

Source: Company, HDFC sec Inst Research

Page | 6

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Cash Flow (Consolidated)

(Rs mn)
Reported PAT
Non-operating inc & EO items
PAT from Operations
Interest
Depreciation
Working Capital Change
OPERATING CASH FLOW ( a )
Capex
Free cash flow (FCF)
Non-operating income
Investments and others
INVESTING CASH FLOW ( b )
Share capital Issuance
Debt Issuance
Dividend
Interest
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
EO items
Closing Cash & Equivalents

Key Ratio
FY14
4,058
(338)
4,396
2,403
961
8,329
16,088
(1,114)
14,974
395
(1,819)
(2,537)
6
(9,288)
(1,511)
(2,649)
(13,442)
109
(733)
4,724

Source: Company, HDFC sec Inst Research

FY15
4,018
379
3,639
2,096
1,046
(8,053)
(1,273)
2,778
1,505
379
(104)
3,053
8
4,350
(1,534)
(2,096)
728
2,508
3,178

FY16E
5,063
410
4,653
2,054
1,076
1,784
9,567
(900)
8,667
410
(490)
(3,000)
(1,534)
(2,054)
(6,588)
2,489
5,541

FY17E
6,517
442
6,075
1,455
1,118
665
9,312
(900)
8,412
442
(458)
(5,500)
(2,386)
(1,455)
(9,340)
(486)
5,020

FY18E
7,802
478
7,324
883
1,160
410
9,777
(900)
8,877
478
(422)
(5,500)
(2,727)
(883)
(9,110)
245
5,081

PROFITABILITY %
GPM
EBITDA margin
EBIT margin
APAT margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax rate %
Asset turnover (x)
Inventory (days)
Debtor (days)
Payables (days)
Cash conversion cycle (days)
Debt/EBITDA (x)
Net D/E
Interest coverage
PER SHARE DATA
EPS (Rs/sh)
CEPS (Rs/sh)
DPS (Rs/sh)
BV (Rs/sh)
VALUATION
P/E
P/BV
EV/EBITDA
OCF/EV (%)
FCF/EV (%)
FCFE/Mcap (%)
Dividend yield (%)

FY14

FY15

FY16E

FY17E

FY18E

25.6
8.0
7.7
3.5
15.9
11.8
10.8

23.7
7.5
7.1
3.6
17.9
13.9
12.4

24.2
8.2
7.8
4.0
20.8
15.6
13.9

24.4
8.7
8.3
4.9
23.6
19.3
16.6

24.4
9.0
8.6
5.3
23.8
21.7
18.6

32.3
2.4
64
54
98
19
2.1
0.5
3.2

32.1
2.5
73
47
100
20
2.5
0.8
3.8

32.1
2.7
70
50
100
20
1.8
0.5
4.6

32.1
3.0
70
50
100
20
1.1
0.3
7.6

32.1
3.3
70
50
100
20
0.6
0.1
14.0

12.6
16.0
4.5
80.6

14.2
17.4
4.5
75.6

17.4
20.6
4.5
87.3

22.9
26.1
7.0
101.3

26.9
30.1
8.0
118.1

18.2
2.8
9.5
20.9
19.5
19.4
2.0

16.1
3.0
9.9
(1.5)
1.8
(0.9)
2.0

13.1
2.6
7.9
12.1
10.9
9.9
2.0

10.0
2.3
6.4
12.5
11.3
10.4
3.1

8.5
1.9
5.4
14.2
12.9
12.0
3.5

Source: Company, HDFC sec Inst Research

Page | 7

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

RECOMMENDATION HISTORY
Coromandel Intl

400

TP

350
300
250

Date

CMP

Reco

Target

3-Nov-14
27-Jan-15

330
290

NEU
BUY

336
350

4-May-15
28-Jul-15
28-Oct-15

234
229
192

BUY
BUY
BUY

275
275
250

200

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

150

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 8

COROMANDEL INTERNATIONAL : RESULTS REVIEW 2QFY16

Disclosure:
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Any holding in stock No
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Page | 9