Basic EPS of the company stood at Rs.5 -...
Transcript of Basic EPS of the company stood at Rs.5 -...
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SYNOPSIS
Coromandel International Limited is in the business segments of Fertilisers, Speciality Nutrients, Crop Protection and Retail.
The Company is manufactures a wide range of fertilisers and markets around 2.9 million tons making it a leader in its addressable markets and the second largest phosphatic fertiliser player in India.
Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 22% over 2010 to 2013E respectively.
Coromandel is the second largest manufacturer of Malathion and only the second manufacturer of Phenthoate.
The Company has signed an agreement with Qatar Fertiliser Company (QAFCO) for supply of Urea.
Coromandel International Limited has signed definitive share purchase agreement to acquire promoter’s stake in 'Sabero Organics Gujarat Limited.
During the quarter, the company has reported Net Profit decreased to Rs.1593.50 million from Rs.1214.50 million in previous year same quarter.
Years Net sales EBITDA Net Profit EPS P/E
FY 11 76363.80 11344.20 6944.60 24.64 12.90
FY 12E 84000.18 11757.50 7635.46 27.08 11.74
FY 13E 92400.20 12798.98 8402.44 29.80 10.67
Stock Data:
Sector: Fertilizers
Face Value Rs. Rs.1.00
52 wk. High/Low (Rs.) 376.00/217.50
Volume (2 wk. Avg.) 44000
BSE Code 506395
Market Cap (Rs.In mn) 89676.00
Share Holding Pattern
1 Year Comparative Graph
Coromandel
International Ltd BSE SENSEX
C.M.P : Rs.318.00 Target Price : Rs.360.00 Date : 23rd Aug 2011 BUY
COROMANDEL INTERNATIONAL LTD
Result Update: Q1 FY 12
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Coromandel Intl 318.00 89676.00 24.64 12.90 4.71 700.00
National Fert 78.40 38461.3 2.58 30.39 2.30 8.50
Rashtriya Chem 81.45 44935.0 4.16 19.58 2.16 11.00
Gujarat State Fert 384.05 30607.1 98.23 3.91 1.08 70.00
Investment Highlights
Q1 FY 12 Results Update
Coromandel International Ltd disclosed results for the quarter ended June 2011.
Net sales for the quarter moved up 16% to Rs.17956.70 million as compared to
Rs.15528.20 million during the corresponding quarter last year. During the
quarter, the company has reported Net Profit increased to Rs.1593.50 million
from Rs.1214.50 million in previous year same quarter. The Basic EPS of the
company stood at Rs.5.65 for the quarter ended June 2011.
Quarterly Results - Standalone (Rs in mn)
As At June-11 June-10 %change
Net sales 17956.70 15528.20 16
PAT 1593.50 1214.50 31
Basic EPS 5.65 8.64 (35)
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Basic EPS of the company stood at Rs.5.65
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Break up of Expenditure
Expenditure for the quarter stood at Rs.15458.50 mn, which is around 13%
higher than the corresponding period of the previous year. Consumption of Raw
Materials cost of the company for the quarter accounts for 71% of the sales of the
company and stood at Rs.12803.40mn from Rs.11846.90mn of the
corresponding period of the previous year. Other Expenditure Cost increased
5%YoY to Rs.2045.8mn from Rs.1953.00mn and accounts for 11% of the revenue
of the company for the quarter.
OPM and NPM for the quarter stood at 15% and 9% respectively from 14% and 8%
respectively of the same period of the last year.
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FY11 Performance
Net profit of the company has increased at 48% yoy Rs.6944.60mn from
Rs.4682.00mn of same period of last year. Total revenue for the year stood at
Rs.76363.80 mn from Rs.63947.30 which is 19% increased than that of a year ago.
Total Income has increased from Rs 77161.40 million for the year ended March 31,
2011 to Rs 65268.40 million for the year ended March 31, 2010.EPS for the year
stood at Rs.24.64 per equity share of Rs.1.00 each.
Operating profit of the company stood at Rs.11344.20mn. OPM for the year stood
at 14.86%. Expenditure of the company increased 16% YoY to Rs.65817.20 mn.
Interest expenses for the year stood at Rs.842.20mn.
Board recommends Dividend
Coromandel International Ltd has recommended Final dividend of Rs. 3.00 on
the face value of Rs.1.00 for the year 2011.
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Allotment of Equity Shares under ESOP
Coromandel International Ltd has informed BSE that the Share Transfer &
Investors' Grievance Committee on July 27, 2011 allotted 66836 equity shares
of Re. 1/- each fully paid to the employees pursuant to ESOP 2007. Consequent
to this allotment, the issued and paid up capital of the Company stands revised
to 282066516 equity shares of Re. 1/- each fully paid amounting to Rs.
282066516/-
Coromandel inks pact with QAFCO for supply of Urea
Coromandel International Limited has signed an agreement with Qatar
Fertiliser Company (QAFCO) for supply of Urea. QAFCO is a leading Ammonia,
Urea and Melamine manufacturer with state of art facilities for manufacturing
Urea, Ammonia and Melamine using Natural Gas.
Qatar Fertiliser Company is one of the largest producers of Urea and Ammonia
and currently producing around 3 million tonnes of Prilled/granular Urea. With
current expansion going on with Qafco 5 & 6, the Company will become the
largest single-site producer of Ammonia and Urea in the world with Ammonia
capacity of 3.8 million tonnes and Urea capacity of 5.6 million tonnes.
Coromandel International acquires 'Sabero Organics
Coromandel International Limited has signed definitive share purchase
agreement to acquire promoters stake in 'Sabero Organics Gujarat Limited', an
established agrochemical manufacturer headquartered in Mumbai, India. last
year.
Sabero Organics is a leading producer and supplier of a variety of fungicides,
herbicides, insecticides and specialty chemicals and is a significant player in
Mancozeb fungicide in global markets. Current Turnover of the Company is Rs.
413 Crores in FY 11, out of which the exports contribute about Rs. 220 Crores.
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Company Profile
Coromandel International Limited is in the business segments of Fertilisers, Speciality
Nutrients, Crop Protection and Retail. Coromandel manufactures a wide range of
fertilisers and markets around 2.9 million tons making it a leader in its addressable
markets and the second largest phosphatic fertiliser player in India.
In its endeavour to be a complete plant nutrition solutions company, Coromandel has
also introduced a range of Speciality Nutrient products including Organic Fertilisers.
The Crop Protection business produces insecticides, fungicides and herbicides and
markets these products in India and across the globe. Coromandel is the second
largest manufacturer of Malathion and only the second manufacturer of Phenthoate.
Coromandel has also ventured into the retail business setting up more than 425 rural
retail centers in the agri and lifestyle segments.
The Company clocked a turnover of Rs.7,528 crore in 2010-11 (USD 1.68 billion as on
March 31, 2011).
Coromandel was ranked among the top 20 best companies to work for by Business
Today and was also voted as one of the ten greenest companies in India by TERI,
reflecting its commitment to the environment and society.
Coromandel is a part of the Rs.17,051 crores (USD 3.8 billion as on March 31, 2011)
Murugappa Group.
Company Products & Services
Coromandel International Limited has multi-locational production facilities and
markets its products all over India and exports pesticides to various countries across
the globe. It is managed by competent and committed professionals using advanced
management practices. The Company is known for fostering a climate of high
performance and continuous improvement.
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Fertilizers
Gromor 14-35-14
Gromor 28-28-0
Gromor 20-20-0-13
Paramfos 16-20-0-1
ParryGold
Parry Super (Single Super Phospate)
Godavari DAP
Godavari 10:26:26
Godavari 12:32:16
GODAVARI 14:35:14
Plant Protection Chemicals
Coromandel manufacture & market pesticides Including Insecticides, Fungicides,
Herbcidies and Plant Biostimulant. The company’s Pesticide portfolio includes several
popular brands that enjoy leadership status in the Indian Market. Coromandel
constantly Engages in reviewing its products mix , to give the best fit for the every kind
and Coromandel has a strong R&D team for developing technologically superior and
environmentally safe pesticides formulations like SC, WDG, Gel Micro emulsions etc's.
By providing wide range of Farm inputs that cater to different types of requirements,
the company has endeared itself to the farmers, deservedly earning a place in his
heart as a real friend in need. Coromandel exports their products to various counties.
Coromandel have technical tie-ups with Multinationals like Dupont, BASF, FMC,
Otsuka , etc for marketing their products in India.
Specialty Nutrients
Introduction of high yielding crop varieties (HYV), intensive cropping together with a
shift in high analysis NPK fertilizers in mid sixties brought a stirring revolution in
increasing crop production in the country, but at the same time heavy withdrawal of
essential plant nutrients through bumper harvests made soil resource fatigue. The
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deficiencies of micronutrients became a serious obstacle in achieving optimum
yield.The intensification of agriculture in India has led to the increasing removal of
secondary and micronutrients from the soil and multiple nutrient deficiencies, which
are becoming a major constraint to further increases in production.This is essentially
due to nutrient removals far in excess of nutrient additions. Greatest blame for soil
nutrient depletion rests with unbalanced fertilizer application consisting of large N
applications without matching amount of other nutrients.
Organic Fertilisers
Retail
Partners
Coromandel has strategic partnerships with leading companies across the globe
including:
FOSKOR (PTY) LTD., South Africa
A Technical Assistance Agreement with Foskor (Pty) Ltd. of South Africa, one of the
largest phosphoric acid producing companies, for extending Coromandel's technical
assistance.
Groupe Chimique Tunisian,Tunisia
A joint venture agreement with Groupe Chimique Tunisien (GCT) and CPG of Tunisia
to set up a phosphoric acid plant at La Skhira, Tunisia, at an estimated cost of US$
180 million.
Sociedad Quimicay Minera
A 50:50 joint venture with Sociedad Quimicay Minera to set up a Water Soluble
Fertiliser (WSF) plant for manufacturing WSF at Coromandel's Kakinada Plant.
Subsidiary Companies
Coromandel Mauritius
Coromandel GETAX Phosphates Pvt.Ltd
Coromandel Brasil Limited
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Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in million) FY10A FY11A FY12E FY13E
12m 12m 12m 12m
Description
Net Sales 63947.30 76363.80 84000.18 92400.20
Other Income 1321.10 797.60 837.48 879.35
Total Income 65268.40 77161.40 84837.66 93279.55
Expenditure -56838.00 -65817.20 -73080.16 -80480.57
Operating Profit 8430.40 11344.20 11757.50 12798.98
Interest -753.70 -842.2 -978.01 -996.71
Gross Profit 7676.70 10502.00 10779.49 11802.27
Depreciation -592.30 -617.40 -598.88 -628.82
Profit before Tax 7084.40 9884.60 10180.62 11173.45
Tax -2402.40 -2940.00 -2545.15 -2771.02
Profit after Tax 4682.00 6944.60 7635.46 8402.44
Equity Capital 280.50 281.80 282.00 282.00
Reserves 14069.30 18759.30 26394.76 34797.20
Face Value(Rs.) 2.00 1.00 1.00 1.00
EPS 33.38 24.64 27.08 29.80
*A=Actual, *E=Estimated
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in million) 30-Dec-10 30-Mar-11 30-Jun-11 30-Sep-11
3m(A) 3m(A) 3m(A) 3m(E)
Description
Net Sales 20612.40 12489.60 17956.70 27294.18
Other Income 187.90 195.60 190.80 200.34
Total Income 20800.30 12685.20 18147.50 27494.52
Expenditure -18264.20 -11501.00 -15458.50 -22381.23
Operating Profit 2536.10 1184.20 2689.00 5113.29
Interest -211.80 -219.40 -243.40 -267.74
Gross Profit 2324.30 964.80 2445.60 4845.55
Depreciation -161.40 -148.60 -142.10 -149.21
Profit before Tax 2162.90 816.20 2303.50 4696.35
Tax -660.00 -90.00 -710.00 -1314.98
Profit after Tax 1502.90 726.20 1593.50 3381.37
Equity Capital 281.70 281.80 282.00 282.00
Face Value(Rs.) 1.00 1.00 1.00 1.00
EPS 5.34 2.58 5.65 11.99
*A=Actual, *E=Estimated
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Key Ratio
Particulars FY10 FY11 FY12E FY13E
EPS (Rs.) 33.38 24.64 27.08 29.80
EBITDA Margin (%) 13.18% 14.86% 14.00% 13.85%
PAT Margin (%) 7.32% 9.09% 9.09% 9.09%
P/E Ratio (x) 15.94 12.90 11.74 10.67
ROE (%) 32.63% 36.47% 28.62% 23.95%
ROCE (%) 24.08% 32.76% 27.18% 24.25%
EV/EBITDA (x) 8.85 7.90 7.63 7.01
Debt-Equity Ratio 1.27 0.72 0.54 0.43
Book Value (Rs.) 102.32 67.57 94.6 124.39
P/bv 5.20 4.71 3.36 2.56
Charts:
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Outlook and Conclusion
At the current market price of Rs.318.00, the stock is trading at 11.74 x FY12E and 10.67 x FY13E respectively.
Price to Book Value of the stock is expected to be at 3.36 x and 2.56 x respectively for FY12E and FY13E.
Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.27.08 and Rs.29.80 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 22% over 2010 to 2013E respectively.
Coromandel is the second largest manufacturer of Malathion and only the second manufacturer of Phenthoate.
The Company has signed an agreement with Qatar Fertiliser Company (QAFCO) for supply of Urea.
Coromandel International Limited has signed definitive share purchase agreement to acquire promoters stake in 'Sabero Organics Gujarat Limited.
During the quarter, the company has reported Net Profit decreased to Rs.1593.50 million from Rs.1214.50 million in previous year same quarter.
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On the basis of EV/EBITDA, the stock trades at 7.63 x for FY12E and 7.01 x for FY13E.
We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.360.000 for Medium to Long term investment.
Industry Overview
Fertilizer sector
� The Indian fertilizer industry has succeeded in meeting almost fully the demand
of all chemical fertilizers except for MOP. The industry had a very humble
beginning in 1906, when the first manufacturing unit of Single Super
Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity of
6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at Cochin
in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were
the first large sized -fertilizer plants set up in the forties and fifties with a view
to establish an industrial base to achieve self-sufficiency in food grains.
Subsequently, green revolution in the late sixties gave an impetus to the growth
of fertilizer industry in India. The seventies and eighties then witnessed a
significant addition to the fertilizer production capacity.
� Fertilizer sector is a very crucial for Indian economy because it provides a very
important input to agriculture. The fertilizer industry in India has played a
pivotal role in achieving self – sufficiency in food grains as well as in rapid and
sustained agriculture growth. India is the third largest producer and consumer
of fertilizers in the world after China and the United States. The growth of the
Indian fertilizer industry has been largely determined by the policies pursued by
the government. The government exercised extensive controls on the pricing,
distribution and movement of fertilizers. The industry is capital intensive and
the production process energy intensive with the combined cost of feedstock
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and fuel accounting for anywhere between 55 and 80 per cent of cost of
production, depending on the type of fertilizers.
Determinants of Fertilize Demand
• Rainfall and irrigation facilities
• Relative prices of fertilizers
• Cropping pattern
• Government policies
Rising demand for fertilizers
� There has been significant growth in the consumption of fertilizers in last three
years due to overall good monsoon. The growth in NPK consumption was 9.50%
in 2004-05, 10.60 % in 2005-06 and 8.40% per cent in 2006-07.Against the
robust growth in consumption, domestic fertilizer production has remained
range – bound in the last decades. The surge in fertilizers demand and stagnant
to modest increase in production has widened the gap between consumption
and production causing larger dependence on imports. Therefore, the rising
demand for fertilizers is providing ample scope for the companies in this sector
to increase their production capacity and volumes thereby, driving the growth
of fertilizer sector.
� The installed capacity as on 30.01.2003 has reached a level of 121.10 lakh MT
of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after
reassessment of capacity) and 53.60 lakh MT of phosphatic nutrient, making
India the 3rd largest fertilizer producer in the world. The rapid build-up of
fertilizer production capacity in the country has been achieved as a result of a
favorable policy environment facilitating large investments in the public, co-
operative and private sectors. Presently, there are 57 large sized fertilizer plants
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in the country manufacturing a wide range of nitrogenous, phosphatic and
complex fertilizers. Out of these, 29 unit produce urea, 20 units produce DAP
and complex fertilizers 13 plants manufacture Ammonium Sulphate (AS),
Calcium Ammonium Nitrate (CAN) and other low analysis nitrogenous
fertilizers. Besides, there are about 64 medium and small-scale units in
operation producing SSP
� The Indian fertilizer industry has come a long way since its early days post
independence. India today is one of the largest producer and consumer of
Fertilizers in the world. India’s production in terms of nutrients (N & P) reached
a level of 155 lakh MT in 2005-06 from 0.39 lakh MT in 1951-52. Similarly,
consumption of fertilizers in terms of nutrients (NPK) has also grown from
about 0.66 lakh MT in 1951-52 to nearly 184 lakh MT in 2004-05.
� The Indian Fertilizer industry, given its strategic importance in ensuring self–
sufficiency of food grain production in the country, has for decades, been under
Government control. The Government has over the years, provided subsidies/
concessions through the fertilizer companies to farmers and the manufacturers
have been compensated through various schemes. Though the Government
control helped in meeting the objective of ensuring creation of capacities and
ultimately achieving self-sufficiency in food grain production, it did not
encourage improving efficiencies in the sector.
� Burgeoning subsidy bill and the need to focus on fiscal prudence, Government
polices in recent times are aimed at encouraging efficiencies in the sector. Policy
measures like the new pricing scheme have made the operations of less efficient
players unviable. The Government polices today are oriented towards achieving
the stated objective of total deregulation in the sector. However, the uncertainty
over exact policy parameters and absence of a comprehensive long term policy
has not augured well for the industry. The financial year 2006-07 began with
practically no clarity on the policy parameters for both nitrogenous and
phosphatic fertilizers.
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� Another important issue confronting the sector is with respect to the feedstock.
Natural gas which is the main feedstock for production of nitrogenous fertilizers
is available in limited quantities and the industry competes with the power
sector for its share. With the Government policy favoring conversion to gas
based units, the demand for gas is only expected to go up in the future, which
may in turn lead to further shortages.
� The Indian fertilizer industry has come a long way since its early days post
independence. India today is one of the largest producer and consumer of
Fertilisers in the world. India’s production in terms of nutrients (N & P) reached
a level of 155 lakh MT in 2005-06 from 0.39 lakh MT in 1951-52. Similarly,
consumption of fertilizers in terms of nutrients (NPK) has also grown from
about 0.66 lakh MT in 1951-52 to nearly 184 lakh MT in 2004-05. The Indian
Fertilizer industry, given its strategic importance in ensuring self– sufficiency of
food grain production in the country, has for decades, been under Government
control.
� The Government has over the years, provided subsidies/concessions through
the fertilizer companies to farmers and the manufacturers have been
compensated through various schemes. Though the Government control helped
in meeting the objective of ensuring creation of capacities and ultimately
achieving self-sufficiency in food grain production, it did not encourage
improving efficiencies in the sector. With the burgeoning subsidy bill and the
need to focus on fiscal prudence, Government polices in recent times are aimed
at encouraging efficiencies in the sector. Policy measures like the new pricing
scheme have made the operations of less efficient players unviable. The
Government polices today are oriented towards achieving the stated objective of
total deregulation in the sector. However, the uncertainty over exact policy
parameters and absence of a comprehensive long term policy has not augured
well for the industry. For instance, the financial year 2006-07 began with
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practically no clarity on the policy parameters for both nitrogenous and
phosphatic fertilizers.
� Another important issue confronting the sector is with respect to the feedstock.
Natural gas which is the main feedstock for production of nitrogenous fertilizers
is available in limited quantities and the industry competes with the power
sector for its share. With the Government policy favouring conversion to gas
based units, the demand for gas is only expected to go up in the future, which
may in turn lead to further shortages. Similarly, in the case of phosphates, on
account of the limited availability of phosphoric acid and rock phosphate in the
country, domestic units are dependent to a large extent on imports. In view of
the limited availability of the main feedstock within the country, fertiliser
companies today are exploring the possibility of setting up joint ventures
abroad to tie up their feedstock requirements. Though a few joint venture
agreements have been signed with respect to supply of phosphoric acid, only a
couple of joint ventures have been established with respect to urea. Domestic
players have also not been able to enter into long term gas supply agreements
primarily due to differences over pricing.
_______________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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