Prabhudas Lilladher has given Accumulate recommendation for Coromandel International with a target price of Rs. 981 in its research report issued on Jul 05, 2021
Prabhudas Lilladher’s research report on Coromandel International
We increase CRIN’s topline/EBITDA/PAT estimates by 9%/17%/19% for FY22 and 9%/15%/17% for FY23 to factor in benefits arising from increase in NB subsidy for Phosphates by >200% to Rs 45.3/kg. we believe, this substantially reduces the impact of rising raw material prices and risk of reduction in volumes due to potential sharp price hikes (~30-50%). Higher subsidy payout and lower MRP coupled with strong underlying demand momentum is likely to aid 5% volume growth in NPK and provide operating leverage benefits. Balance sheet has improved with little debt and minimal working capital (@ 20 days in FY21). We expect sustained re-rating given 1) GoI move in increasing subsidy in inflationary RM scenario 2) robust FCF generation (Rs65.8bn pretax over FY21-23), 3) net cash balance sheet (INR 7.2 bn), 3) comfortable outstanding subsidy position (lowest ever @ 18 days) and 4) strong parentage of Murugappa group. Accumulate.
Outlook
We assign ACCUMULATE rating (from Under Review) on CRIN with TP of Rs 981 based on 18x FY23E EPS of Rs 54.5 (Previously 15x).