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You are here : IndiaNotes >> Research & Analysis >> Companies >> Coromandel International Ltd. >> Research

Dynamic Levels recommend a fertilizer scrip for target of 375

Dynamic Equities Pvt Ltd | 13 Jan, 2017  | Follow Author | Add to my Favourites 
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Coromandel International Limited or Coromandel, as it is widely known, is India’s second largest Phosphatic fertilizer player. The Company clocked a turnover of Rs. 11,500 Crore during FY 2015-16. It was ranked among the top 20 best companies to work for by Business Today. The company’s products and services include:


•    Fertilizers

•    Specialty Nutrients

•    Crop Protection

•    Retail


Coromandel was also voted as one of the ten greenest companies in India by TERI, mirroring its commitment to the environment and society. Coromandel is a part of the INR 295 Billion Murugappa Group.


Muriate of Potash is commonly known as Potash or Potassium Chloride. It is the third largest crop nutrient group, next to nitrogen and phosphorus. Rock phosphate, or phosphorite, is mined from clay deposits that have phosphorus and is used to make organic phosphate fertilizers that many gardeners use.


Coromandel- Making Farming prosperous:


India is largely dependent on Farming and hence, increasing the yields becomes imperative for the farmers for their sustenance and that of others.


•    Coromandel offers unique fertilizer grades that provide balanced nutrition to the crops.

•    The company ventured into organic manure for improving the health of Indian soils and has been enhancing their offerings.

•    Also, Coromandel has introduced “Gromor Sampoorthi”, a complete nutrition programme for empowering the farmers with the right knowledge. Under the programme, the farmers are provided with a complete crop-wise nutrition scheduled developed by their experts after extensive research.

•    The company also provides Value Added Services like Soil Test, Petiole test and crop Advisory Services. Petiole test is the test of the stalk that joins a leaf to a stem.

 

The Yield Shield:


As per a research conducted by Assocham, India annually loses crops worth close to Rs. 50,000 crore to pests & diseases. To avoid this, the company has been:


•    Manufacturing and distributing crop protection products such as Insecticides, Fungicides and Herbicides.

•    Under their umbrella brand “Gromor Suraksha”, Coromandel offers a host of high impact crop protection products. These products help millions of farmers every day to address their crop protection related concerns.

•    Their strong in-house R&D centre focuses on developing technologically superior products for farmers.

•    They also conduct many practical training sessions for farmers on right methods of using pesticides.


Industry Outlook:


Major Threats:


•    Threat from Genetically Modified (GM) seeds: Genetically modified seeds possess self-immunity towards natural adversaries which have the capability to negatively impact the business of agrochemicals.


•    Integrated Pest Management (IPM) & rising demand for organic farming: Promotion of IPM, zero budget farming and usage of bio-pesticides by Indian Government and NGOs is gaining impetus. With increasing demand for organic food, farmers in certain states like Karnataka have reduced chemical usage and have adopted organic farming. Agrochemical companies will have to deal with the rising environmental awareness and address concerns on negative impact of pesticide usage.


Opportunities:


•    Limited farmland availability and growing exports: This has put the pressure on the Agriculture to increase yield per hectare which can be achieved through increased usage of agrochemicals.


•    Growth of horticulture & floriculture: Growing horticulture and floriculture industries will result in increasing demand for agrochemicals, especially fungicides.


•    Increasing awareness: Companies are increasingly training farmers concerning the right use of agrochemicals in terms of quantity to be used, the right application methodology and appropriate chemicals to be used for indentified pest problems. With increasing awareness, the use of agrochemicals is expected to increase.


Key points in Quarterly Result


Two key strengths


•    SL18- EPS has shown a jump from 5.28 to 7.32 almost 25.77% on the yearly basis.

•    Bottom line in YoY has shown tremendous growth where operating profit has gone up by 28.66% and Profit after tax jumped by 25.54% YoY.


Two Key Weaknesses


•    SL 1- Topline quarter on quarter has gone up by 75.03% because of September being its seasonal quarter but Year-on-Year it was almost flat.

•    Overall performance of the company was good YoY with EPS growth of 25.77% operating profit growth of 28.66%.


Investment Rationale


•    EPS has shown a jump from 5.28 to 7.32 almost 25.77% on the yearly basis.


•    Bottom line in YoY has shown tremendous growth where operating profit has gone up by 28.66% and Profit after tax jumped by 25.54% YoY.


•    SL13- Company has lowered its Non Current liability, this shows that company is focusing on debt reduction. Company’s total Liability has come down to 234.24 in March 2016 from 301 in March 2015.


•    SL-15-Long Term Borrowings have come down drastically from 66.81 in March 2015 to 30.55 in March 2016.


•    Employee Cost has gone up marginally.


•    The company’s share price is trading 4 times to its Book value.


•     Company has a huge market capitalization.


•    Coromandel is working with Punjab Agricultural University and Aston University to do a three year study on analyzing bio-char as a fertilizer, analyze the energy output for rural application and do a cost benefit analysis for this technology for commercial applications.


•    Under their umbrella brand “Gromor Suraksha”, Coromandel offers a host of high impact crop protection products. These products help millions of farmers every day to address their crop protection related concerns.


•    Coromandel has introduced “Gromor Sampoorthi”, a complete nutrition programme for empowering the farmers with the right knowledge. Under the programme, the farmers are provided with a complete crop-wise nutrition scheduled developed by their experts after extensive research.


•    The company has also partnered with the IIM Ahmedabad Alumni Association-Hyderabad Chapter to provide quality education for economically deprived first generation learners at Udbhav School.


On 13th January, 2017, at 1.50 pm, Coromandel share price is trading @ 327.90. We recommend BUY in Coromandel International Ltd @ 315 with the target of 375. The stock is trading at PE Multiple of 24.21 having book value of 83.15 per share.

 


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Dynamic Equities Pvt. Ltd. is a a SEBI Registered Investment Advisor and Stock Broker, a leading financial services provider, and one of the major players in the Equity markets in India. With an experience of over 15+ years in Stock Markets and Equity Research, they provide daily updated Support & Resistance of 4200 instruments across 93 exchanges and 56 countries globally. They have an in-house team of over 25 analysts. Under the guidance and mentorship of Mr. Shailesh Saraf, MD of Dynamic Equities Pvt. Ltd., these analysts are dedicately involved in guiding their clients and users of the website www.dynamiclevels.com for trading in the market. Mr. Shailesh Saraf has an experience of over 24 years in the financial market, especially in capital & derivatives market operations, trading, research and management related areas. Dynamic Levels is a website owned by Dynamic Equities Pvt. Ltd. The website can be reached at www.dynamiclevels.com.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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