Coromandel International
BSE SENSEX
25,603
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,847
CRIN IN
291.3
64.5 / 1.0
260 / 146
17/22/-2
38
37.9
28 April 2016
4QFY16 Results Update | Sector: Fertilizers
CMP: INR221
TP: INR260(+17%)
Buy
Financials & Valuations (INR b)
Y/E Mar
2016 2017E
115.2 127.8
Net Sales
7.7
9.7
EBITDA
3.4
5.0
PAT
11.8
17.1
EPS (INR)
-14.9
44.6
Gr. (%)
83.2
93.1
BV/Sh (INR)
14.9
19.4
RoE (%)
16.0
20.8
RoCE (%)
18.7
12.9
P/E (x)
2.7
2.4
P/BV (x)
Estimate change
TP change
Rating change
Results in-line:
Coromandel’s overall revenue grew 1% YoY to INR30.2b (vs. our
estimate of INR28.7b) in 4QFY16. EBITDA grew 25% YoY to INR2b (vs. our
estimate of INR1.9b), while EBITDA margin expanded by 130bp YoY to 6.6% (vs.
our estimate of 8%). The subsidy:non-subsidy revenue mix stood at 86:14 for
4QFY16 (same as 4QFY15), while EBITDA mix was 64:36 (same as 4QFY15). For
FY16, the subsidy:non-subsidy revenue mix stood at 84:16, while EBITDA mix
was 64:36. The margin expansion was driven by a growth of 8% YoY in
manufactured phosphates. As a result, PAT grew 35% YoY to INR927m (vs. our
2018E
estimate of INR901m) in 4QFY16. Subsidy outstanding stood at INR20.2b which
144.4
is expected to be released by the government starting May 2016.
12.0
Fertilizer revenue growth to bounce back on normal monsoon:
The India
6.8
Meteorological Department as well as Skymet have provided an encouraging
23.5
monsoon forecast for FY16 which will be a key positive for CRIN. Management
37.3
has highlighted that the industry currently has an inventory of 6m ton, with a
108.2
major portion lying in North India (4m). CRIN enjoys a stronghold in Southern
23.3
India, but it does not hold much inventory in the North (largely has imported
26.8
DAP) and hence, it holds overall less channel inventory. CRIN is geared up to
9.4
supply goods if demand increases sharply on account of a normal monsoon and
2.0
has sufficient inventory for 1QFY17.
Share gains in key markets continue:
The company’s all-India market share
stood at 14.4% in FY16 as against 16.2% in FY15. CRIN gained share in the
markets of Andhra Pradesh and Telangana where its share stood at 60% in FY16,
up from 59% in FY15. Management has highlighted that CRIN also gained
market share in Tamil Nadu (10%), West Bengal (12%), and Madhya Pradesh and
Chhattisgarh (14%), but lost market share in North India, Maharashtra and
Karnataka (due to its withdrawal from the co-marketing institutional business).
On the export front, the technical business driven by Mancozeb continued to
show encouraging traction, which partly offset the decline in the domestic
formulation business.
Valuation and view:
We expect 12% revenue CAGR and 160bp margin
expansion over FY16-18, translating into 41% PAT CAGR. We believe that CRIN
has significant operating and financial levers ahead. Maintain
Buy
with a TP of
INR260, 12x FY18E EPS.
Encouraging outlook driven by normal monsoon forecast
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 39825126
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +912239825422/Kaustubh
Kale
(Kaustubh.Kale@MotilalOswal.com); +912230102498
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Coromandel International
Exhibit 1: Revenue trend
Revenue (INRm)
32,154
18,977
34,660
27,562
21,840
20%
14%
5%
-1%
18,807
8%
7%
29,621
29,976
16%
21,812
3%
-7%
1%
Growth YoY (%)
37%
35,644
27,555
30,209
2%
Source: MOSL, Company
Exhibit 2: EBITDA trend
EBITDA (INRm)
8.9%
5.8%
2,850
1,092
1,792
1,220
2,252
10.0%
8.0% 8.2%
6.5%
3,467
7.6%
5.3%
4.2%
924
EBITDA Margins (%)
8.8%
6.0% 6.6%
3,137
2,004
Exhibit 3: PAT trend
PAT (INRm)
5.0%
3.4% 3.7%
1.1%
1,601
214
1.7%
942 808 326
1,799
1,207 687
5.2%
4.1%
2.3%
0.7%
1,735
145
PAT Margin (%)
4.9%
2.9% 3.1%
927
1,597
2,192
1,653
804
Source: MOSL, Company
Source: MOSL, Company
Exhibit 4: Capacity utilization to improve
Capacity (m MT)
76%
58%
65%
70%
Capacity Utilization (%)
66%
76%
85%
3.3
2012
3.2
2013
3.6
2014
3.6
2015
3.9
2016
3.9
2017E
3.9
2018E
Source: Company, MOSL
Valuation and view
We value CRIN at 12x FY18E EPS, which we believe is justified considering:
Significant operating and financial levers over next two years
CRIN has significant operating and financial levers ahead over the next two years.
Fertilizer capacity utilization currently stands at just 70% which we expect to be
ramped up to 79% by FY18. Further, CRIN is largely focused on organic growth thus
envisaging limited capex over the next two years (largely maintenance capex
amounting to INR1b annually). Improving asset utilization, stable fertilizer and non-
28 April 2016
2

Coromandel International
fertilizer margins, and improving working capital situation will generate significant
free cash over the next two years. This will result in net debt to equity declining
from 0.7x in FY16 to 0.2x in FY18. Similarly, we expect RoCEs and RoEs for the
company expanding from 16% / 15% to 27% and 23% respectively over FY16-18.
Profitability mix to improve in favor of non-subsidy business
The subsidy business accounted for ~64% of CRIN’s EBITDA in FY16. EBITDA margin
is ~6% in the subsidy business as against ~15% in the non-subsidy business. By FY18,
we expect the EBITDA contribution of non-subsidy business increase from 36% to
38%. The shift in EBITDA mix in favor of the more lucrative non-subsidy business
would enhance the return on capital for the company.
Exhibit 5: Price to earnings (one year forward)
30
25
20
15
10
5
0
P/E (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
Exhibit 6: Price to book (one year forward)
5.0
4.0
P/B (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
17.0
11.5
9.2
10.9
3.0
2.0
1.0
0.0
3.1
2.5
2.0
1.9
Source: MOSL, Company
Source: MOSL, Company
We value the stock at 12x FY18E EPS and arrive at a target price of INR260 – 17%
upside. Maintain
Buy
rating.
28 April 2016
3

Coromandel International
Story in charts: Best play in fertilizers
Exhibit 7: India has lowest fertilizer penetration
Country-wise Fertiliser Consumption (Kgs/ha)
333
275
166
2.4
1.0
India
Brazil
Pakistan
Japan
China
2007
2.1
1.0
2008
5.9
5.5
Exhibit 8: NPK ratio skewed at 7.7:3:1 v/s ideal of 4.2:2:1
N
P
K
6.9
4.6
1.6
1.0
2009
4.3
2.0
1.0
2010
4.3
3.1
2.0
1.0
2011
1.0
2012
3.0
7.7
128
133
1.0
2013
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: Revenue growth set to accelerate
Capacity (m MT)
76%
58%
70%
Capacity Utilization (%)
66%
76%
85%
Exhibit 10: Dependence on subsidy is declining every year
Farmgate price as a percentage of total realization
Subsidy as a percentage of total realization
37%
65%
40%
48%
63%
65%
63%
3.3
2012
3.2
2013
3.6
2014
3.6
2015
3.9
2016
3.9
2017E
3.9
2018E
Pre NBS
60%
FY11
52%
FY12
37%
FY13
35%
FY14
Source: MOSL, Company
Source: MOSL, Company
Exhibit 11: Non-subsidy business contribution to rise to 19%
Phosphatic Fertilisers
10%
10%
20%
Non-subsidy business
Exhibit 12: RoE set to improve to 23% in FY18E
RoE (%)
18.8
23.3
19.4
14.9
18%
16%
18%
19%
16.3
18.0
90%
90%
80%
82%
84%
82%
81%
FY12
FY13
FY14
FY15E
FY16
FY17E
FY18E
FY13
FY14
FY15E
FY16
FY17E
FY18E
Source: MOSL, Company
Source: MOSL, Company
28 April 2016
4

Coromandel International
Exhibit 13: Key assumptions (INR m)
Revenue mix
Phosphatic Fertilizers
Non-subsidy business
EBITDA mix
Phosphatic Fertilizers
Non-subsidy business
Revenues (INR m)
Phosphatic Fertilizers
Non-subsidy business
Total
EBITDA Margins (%)
Phosphatic Fertilizers
Non-subsidy business
FY12
90%
10%
70%
30%
89,114
9,902
99,016
8%
32%
11%
FY13
90%
10%
70%
30%
81,303
9,034
90,337
7%
26%
9%
FY14
80%
20%
64%
36%
80,426
20,106
100,532
6%
14%
8%
FY15
82%
18%
64%
36%
92,713
20,352
113,064
6%
15%
8%
FY16
84%
16%
64%
36%
96,307
18,913
115,219
5%
15%
7%
FY17E
82%
18%
63%
37%
104,853
22,946
127,799
6%
16%
8%
FY18E
81%
19%
61%
39%
116,920
27,438
144,358
6%
17%
8%
28 April 2016
5

Coromandel International
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2011
76,393
18.4
10,556
13.8
621
9,935
889
811
0
9,857
2,921
29.6
0
6,937
6,937
48.3
2012
99,016
29.6
10,544
10.6
597
9,947
1,261
780
-355
9,111
2,766
30.4
-43
6,388
6,635
-4.3
2013
90,337
-8.8
7,679
8.5
711
6,968
2,102
701
0
5,567
1,231
22.1
17
4,320
4,320
-34.9
2014
100,532
11.3
8,052
8.0
961
7,092
2,403
608
-126
5,171
1,521
29.4
84
3,565
3,654
-15.4
2015
113,064
12.5
8,535
7.5
1,046
7,489
2,096
566
-39
5,920
1,902
32.1
0
4,018
4,045
10.7
2016
115,219
1.9
7,717
6.7
1,065
6,652
2,204
656
250
5,354
1,744
32.6
0
3,610
3,441
-14.9
2017E
127,799
10.9
9,725
7.6
1,064
8,661
1,923
688
0
7,427
2,451
33.0
0
4,976
4,976
44.6
(INR Million)
2018E
144,358
13.0
11,982
8.3
1,107
10,875
1,398
723
0
10,200
3,366
33.0
0
6,834
6,834
37.3
Balance Sheet
Million)
(INR
2011
282
19,286
19,567
15,623
815
36,005
13,529
5,515
8,015
3,027
1,706
42,544
15,139
2,024
9,605
15,777
19,287
17,965
1,321
23,258
36,005
2012
283
23,721
24,003
29,434
675
54,270
16,193
6,704
9,489
5,267
1,495
59,930
19,218
9,579
9,847
21,286
25,381
23,879
1,502
34,549
54,270
2013
283
21,683
21,966
29,458
1,877
54,364
21,269
7,397
13,872
4,201
1,599
59,758
14,775
18,201
5,346
21,436
29,757
27,765
1,992
30,001
54,364
2014
283
22,526
22,810
18,429
1,890
43,382
22,070
8,212
13,858
744
3,416
54,544
17,529
14,835
4,722
17,459
32,663
30,736
1,927
21,881
43,382
2015
291
21,729
22,020
22,878
1,875
46,774
22,981
9,189
13,793
465
3,522
65,834
22,592
14,464
3,176
25,602
36,843
35,616
1,228
28,991
46,774
2016
291
23,958
24,249
22,228
1,711
48,188
24,233
10,254
13,980
0
3,890
71,055
23,521
18,093
2,030
27,411
40,739
38,692
2,047
30,316
48,188
2017E
291
26,836
27,127
16,228
1,711
45,066
25,233
11,317
13,916
0
3,890
69,279
24,874
18,858
1,738
23,809
42,021
39,660
2,361
27,258
45,067
2018E
291
31,223
31,515
11,728
1,711
44,954
26,233
12,424
13,809
0
3,890
74,151
27,294
21,301
1,825
23,730
46,899
44,135
2,764
27,252
44,954
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
28 April 2016
6

Coromandel International
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2011
24.6
26.8
69.4
7.0
33.1
9.0
8.2
3.2
0.9
6.6
3.2
40.1
30.4
2.1
10
72
73
0.2
2012
23.5
25.6
84.9
7.0
36.0
9.4
8.6
2.6
0.8
7.8
3.2
30.5
24.2
1.8
35
71
78
0.8
2013
15.3
17.8
77.6
4.5
34.7
14.5
12.4
2.8
1.0
11.4
2.0
18.8
14.6
1.6
72
60
97
1.0
2014
12.9
16.3
80.6
4.5
42.0
17.1
13.6
2.7
0.8
9.5
2.1
16.3
16.6
2.3
53
64
98
0.5
2015
13.9
17.5
75.6
4.5
39.2
15.9
12.6
2.9
0.7
9.7
2.0
18.0
18.7
2.4
46
73
100
0.7
2016
11.8
15.5
83.2
4.0
38.7
18.7
14.3
2.7
0.7
10.8
1.8
14.9
16.0
2.4
56
75
110
0.7
2017E
17.1
20.7
93.1
6.0
42.1
12.9
10.7
2.4
0.6
8.0
2.7
19.4
20.8
2.8
53
71
100
0.4
2018E
23.5
27.3
108.2
7.0
35.8
9.4
8.1
2.0
0.5
6.1
3.2
23.3
26.8
3.2
53
69
98
0.2
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2011
10,556
-316
665
-2,949
0
7,956
-1,907
6,049
-60
901
-1,067
60
-4,110
-870
-1,969
-6,889
1
9,605
9,605
2012
10,544
540
-7,370
-2,760
0
954
-2,361
-1,407
-3,668
-1,731
-7,760
37
10,618
-1,310
-2,296
7,048
242
9,605
9,847
2013
7,679
822
2,546
-1,207
0
9,841
-2,585
7,255
-2,282
-187
-5,054
26
-5,626
-2,014
-1,674
-9,288
-4,501
9,847
5,346
2014
8,052
988
6,683
-1,112
0
14,611
-1,114
13,497
-962
282
-1,794
-44
-9,238
-2,649
-1,511
-13,442
-624
5,346
4,722
2015
8,535
1,208
-7,456
-1,425
0
863
-921
-59
-19
-827
-1,767
33
3,693
-2,159
-2,208
-642
-1,546
4,722
3,176
2016
7,717
250
-2,471
-1,744
0
3,752
-787
2,965
368
656
237
0
-650
-2,204
-2,281
-5,135
-1,146
3,176
2,030
2017E
9,725
0
2,766
-2,451
0
10,040
-1,000
9,040
0
688
-312
0
-6,000
-1,923
-2,097
-10,020
-292
2,030
1,738
(INR Million)
2018E
11,982
0
93
-3,366
0
8,709
-1,000
7,709
0
723
-277
0
-4,500
-1,398
-2,447
-8,345
87
1,738
1,825
28 April 2016
7

Coromandel International
Corporate profile
Company description
Exhibit 1: Sensex rebased
Coromandel International (CRIN) is the flagship
company of the Murugappa Group and is a
subsidiary of EID Parry (India) Limited (EIDP), which
holds 62.56% of its equity. CRIN has multi-locational
production facilities, and manufactures and markets
a wide range of phosphatic fertilizers, crop
protection products, specialty nutrients like sulphur
pastelles, water-soluble fertilizers, micronutrients,
and organic fertilizers. It exports its crop protection
products to countries across the globe. CRIN also
provides agricultural inputs/solutions and offers
lifestyle products through its rural retail centers,
branded
Mana Gromor Centers.
Fertilizer business
contributed 80% of revenue and 64% of EBITDA in
FY14, while the plant protection business
contributed 20% of revenue and 36% of EBITDA.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Dec-15
62.1
11.2
4.9
21.8
Promoter
DII
FII
Others
Sep-15
62.1
7.7
5.5
24.8
Dec-14
63.2
6.0
6.6
24.3
Source: Capitaline
Exhibit 3: Top holders
Holder Name
ICICI Prudential Life Insurance Company Ltd
Groupe Chimique Tunisen
Birla Sun Life Trustee Company Private
Limited A/C Birla Sun Life Long Term
Advantage Fund
Franklin Templeton Mutual Fund A/C
Franklin Indiaprima Fund
NA
% Holding
5.1
1.7
1.1
1.0
0.0
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
A Vellayan
V Ravichandran
Sameer Goel
P Varadarajan
Designation
Chairman
Vice Chairman
Managing Director
Company Secretary
Exhibit 5: Directors
Name
B V R Mohan Reddy
Prasad Chandran
Uday Chander Khanna
Name
M M Venkatachalam
Ranjana Kumar
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells
V Kalyanaraman
Type
Statutory
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
Source: Capitaline
MOSL
forecast
11.0
17.1
23.5
Consensus
forecast
12.0
16.5
19.9
Variation (%)
-8.4
3.8
17.9
Source: Bloomberg
28 April 2016
8

Coromandel International
NOTES
28 April 2016
9

Disclosures
Coromandel International
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