Coromandel International - Way below estimates - Kotak

Coromandel's 3QFY13 results were way below estimates, led by pressure on margins in the fertilizer business. High inventories in the system led the company to offer discounts. Besides, higher credit was extended in the market, leading to high working capital and finance costs. The company has acquired Liberty Phosphates and other group companies for Rs3.75 bn (higher end).

We view the move negatively as we consider SSP an even lower value-added business than complex fertilizer, about which we have been expressing concern. Coromandel has paid almost replacement costs for assets, which is negative in our view.

We cut our estimates and retain SELL with a revised target price of Rs220 (Rs260 earlier).

Source : Equity Bulls

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