Potential Gain Of Upto 32% From This India's Largest Agro-Fertiliser Mid Cap Stock

Motilal Oswal suggests investors to buy the stock of Coromandel International, as it believes the stock price may increase upto 32%, based on its estimates. Being India's largest private sector phosphatic fertiliser has proved well for the stock and drives its earnings.

What does Coromandel International do?

Coromandel International is a pioneer and leader providing agri solutions. It offers diverse products and services across the farm value chain, including seeding to harvesting solutions. This mid cap company offers plant nutrients and crop protection solutions including fertiliser, crop protection, bio-pesticides, cpecialty nutrients and organic fertiliser. The comany also operates a network of around 750 rural retail outlets across Andhra Pradesh, Telangana and Karnataka offering products and farming services including crop advisory, soil testing and farm mechanization to around 3 million farmers through gromor stores. It is the world's largest neem-based bio-pesticide manufacture and the number one fertiliser marketer.

Coromandel Fertilisers Ltd was incorporated by the synergistic efforts of two major companies of the US namely Chevron Chemical Company and International Minerals and Chemicals Corporation and EID Parry Ltd, a leading business house in India in the year 1961.

Coromandel's Revenue was up by 64% driven by fertiliser volume

Accoring to Motilal Oswal Coverage report, "Coromandel reported a revenue of INR83.1b (est. INR68b) in 3QFY23, up 64% YoY, led by strong sales volume in NPKs and higher subsidy realization in the Nutrients business. Total phosphate fertilizer manufacturing volumes (including SSP) grew 20% YoY to 1.13MMT, while total manufacturing phosphate fertilizer volumes (DAP and NPK) increased 21% YoY to 0.9MMT. EBITDA rose 44% YoY to INR7.8b (est. INR6.6b). As per our calculations, manufacturing EBIDTA/MT (including SSP) stood at INR5,320 (up 25% YoY, but down 16% QoQ). The same for total manufacturing phosphate fertilizers (DAP and NPK) stood at INR6,152 (up 24% YoY, down 16% QoQ). For 9MFY23, revenue / EBITDA / Adj. PAT grew 62%/43%/43%, respectively."

Buy Sock of Coromandel, with a Target Price of Rs 1,180 per share

The brokerage house explains the reasons for suggesting investors to buy stock of Coromandel based on its estimates, as the price could go up. "Going forward, the key growth levers include: i) the management's focus on increasing penetration in its existing markets, ii) debottlenecking to raise capacity and strengthen its back-end supply chain, iii) efforts to lower the cost of raw material, while maintaining the same level of quality, and establish an alternative sourcing destination (which will aid cost savings), iv) inorganic growth, and v) its focus on profitable growth in the Retail business by reorganizing stores based on consumption patterns. Factoring in strong 3QFY23, we raise our EBITDA estimates for FY23/FY24/FY25 by 6%/5%/7%, respectively, on improving EBIDTA/MT of fertilizer business. We value the stock at 16x Dec'24 EPS to arrive at our price target of INR1,180. We reiterate our Buy rating."

The market capitalisation of this mid cap stock is Rs 26,502.04 crore. The last traded price of the company stock is Rs 901.40 per share, its 52-week high is at Rs 1,094.40 per share and the 52-week low is at Rs 730 per share.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.