Coromandel International Ltd. - PINC Result Review

Coromandel International's (CIL) Q1FY11 net sales remained flat at Rs15.5bn (-2.5% YoY). However, implementation of NBS policy and benefits from working capital management resulted in OPM expanding by 2.6x to 12%. Consequently net profit surged by 132.9% YoY to Rs1.2bn against our estimate of Rs950mn.

Outlook: We believe that fertiliser sector is going through a structural change where we will see lots of fresh investment driven by favorable policy environment in coming years, against lackluster last decade and hence we do not see any negativity arising out of govt intervention at regular intervals.

VALUATIONS AND RECOMMENDATION

We have increased our EPS estimate for FY11 and FY12 by 13% and 16% respectively on the back of higher volumes and better margins. At the CMP of Rs508, CIL trades at FY11 and FY12 P/E of 12.8x and 10.5x and EV/EBITDA of 8.4x and 6.6x respectively. We maintain our 'BUY' recommendation, with an increased target price of Rs581 (12x FY12E EPS), on the back of higher multiple post-NBS, a premium to Urea players.

Source : Equity Bulls

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