Coromandel International - Disappointing results - Anand Rathi

Maintain BUY, Target reduced Rs. 252

Highlights

- The top line for the company grew by just 2.83% though it was a dampener in EBIDT and PAT level which declined drastically by 48.2% and 78.57% respectively on y-o-y basis.

- Margins were also impacted, EBIDT stood at 5.75% down from 11.37% and PAT stood at 1.29% down from 6.16% on y-o-y basis.

- The numbers were disappointing mainly due to subdued volume due to production cuts for inventory management and higher interest cost for this quarter. Also huge subsidy outstanding is a major concern for the company. Also MTM hit due to currency movement has impacted the financials.

- In the concall management has informed of price hikes taken from July 1st 2013 to the tune of Rs. 1500/mt. Tunisia plant has started production and shipments are expected soon. C-train project has been stabilised. These triggers are overall positive for the company in the longer run.

- On the other hand the turnaround in the Sabero Organic and strong growth seen in the non subsidy segment will prove positive for the company going forward though it saw a muted quarter for Liberty Phosphate.

- The company gained market share from 14.9% in Q1FY13 to 20.5% in Q1FY14.

- So though the short to medium term scenario looks under pressure but on the longer term view of more than 1 year it will start reflecting in numbers due to the various triggers mentioned.

- We would like to maintain the BUY recommendation on the stock though we would reduce the target to Rs. 252 from Rs. 384 by valuing at a PE of 14x which is an average of the 5 years historical high PE's to its FY15 expected earnings of Rs 15.

Source : Equity Bulls

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