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Coromandel International Ltd

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CMP: Rs 650.55
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Rs. 698.90 / 336.60
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Coromandel International Ltd Sensex
Coromandel International Ltd
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+91 22 6639 3000

Coromandel International Ltd

The company has robust position in India’s phosphatic fertiliser industry with wide product portfolio


Coromandel International Ltd (Coromandel) is one of India’s largest integrated agriculture solutions providers and a flagship company of the diversified Murugappa Group. Its business segments consist of fertilizers, specialty nutrients, crop protection and retail. The company manufactures a wide range of fertilizers and markets around 4.5 million tons making it a leader in its addressable markets. In its endeavour to be a complete plant nutrition solutions company, it has also introduced a range of specialty nutrient products including organic fertilizers. The crop protection business produces insecticides, fungicides and herbicides and markets these products in India and across the globe. The company is the second largest manufacturer of Malathion and major manufacturer of Phenthoate in Asia. The company has global registrations in 62 countries and has strong presence in export markets of Latin America, SE Asia and Africa. Coromandel has also ventured into the retail business setting up around 800 rural retail centres in the states of Andhra Pradesh, Telangana, Karnataka and Maharashtra.


Investment Thesis

Established player in India's phosphatic fertiliser market
The company is the second-largest player in the phosphatic-fertiliser industry in India with a market share of around 17%. The fertilizer business relaunched GroSmart brand which has been well-received by customers and has created a niche in the market. It has a wide product portfolio and leading position in Andhra Pradesh and Telangana which are India's largest complex-fertiliser markets. The company continues to focus on building differentiation through value-added, unique product offerings and market development through integrated nutrient and agronomist teams.

Crop protection segment to provide incremental growth

The company is the 5th largest Indian player in crop protection segment and has presence across ~81 countries through wide product portfolio covering approximately 60 brands. During FY20, the business launched 6 new products including two in-house manufactured technical - Pymetrozine and Pyrozosulfuron, and 4 formulated products. All the new products have received an encouraging response from the market and the company plans to continue introducing several new products in the market. During April 2018, it acquired the bio-pesticides business of E.I.D. Parry India Ltd, which has further diversified the product profile under the crop protection business.

Focus on brand building rather than just being a commodity business

The company's flagship brand Gromor, has strong recall among customers and commands a premium in its key markets. The company’s main focus is to build its brands and move away from being a commodity business. It also has its own retail outlets, Mana Gromor Centres, through which it sells fertilisers, crop protection chemicals, speciality nutrient products, seeds, sprayers, veterinary products, and others.

Capacity expansion to propel growth

The brownfield expansion project of the phosphoric acid facility at Vishakhapatnam has been completed in October 2019. With this, the Vishakhapatnam unit will become self-sufficient for its phosphoric acid needs. Further during FY20, the company commissioned 3 new plants in the crop protection segment for manufacture of Pymetrozine, Pyrozosulfuron, and Mancozeb WDG. Major infrastructure upgrades including new warehouses at Sarigam and Dahej and pilot plant upgrade at Ankleshwar have been completed.

Focus on R&D activities

Coromandel continues to focus and invest in research and development activities and product development initiatives. The Coromandel Lab with IIT Bombay and Monash Academy has made significant progress in the development of next-generation fertilizers which will offer high nutrient efficiency. A collaborative project has been initiated with IIT Kharagpur for the rapid testing of soil and petioles. During the year, Fitsol Pomogranate, a crop-specific product and two manufactured products Novozin and Bosmax based on in-house R&D technology were introduced in the Speciality Nutrient business segment.

COVID-19 impact

The recent lockdown did not have an adverse effect on sales volumes of the company as agriculture segment was classified as an essential sector by the government. The government through various means has been trying to limit the impact on farming from COVID-19; thus, we expect the company to be relatively insulated from the disruption.



Key Risks

Regulated nature of the fertiliser industry

The fertiliser industry is highly controlled by government policies with fertiliser subsidy being an important component of profitability. Thus any delay in payment of fertiliser subsidies by government can impact the business operations.

Shortfall or delay in rainfall this monsoon season can hamper fertiliser demand.



Financial Highlights

(Rs Crores)

Net Sales11082.9213224.5613136.7014231.0015347.00
Material Costs7609.399339.589055.619819.3910589.43
Gross Profit3473.533884.984081.094411.614757.57
% margins31.30%29.40%31.10%31.00%31.00%
Employee Cost361.87411.07461.08498.09552.49
Other Expenses1855.222030.861889.022020.802133.23
% margins11.30%10.90%13.20%13.30%13.50%
Other Income59.6937.0840.0442.3045.90
Profit Before Taxation & Exceptional Items1038.691115.591377.741569.671742.49
Exceptional Items-23.85
Profit Before Tax1038.691091.741377.741569.671742.49
Provision for Tax346.78372.10313.47395.56439.11
% margins6.20%5.40%8.10%8.30%8.50%
Source: Stockaxis Research, Company Data


We expect robust agricultural growth going forward on the merits of recent agricultural reforms announced by the government, combined with good reservoir levels and forecast of a normal monsoon, which shall be enablers for a good kharif season. Further, we expect the company to grow on the back of building power brands, investing in R&D and data analytics, having a deeper understanding of their consumers and strengthening their efficiencies across the value chain. The stock is currently trading at 15.1x FY22E EPS.