Lower Fertilizer margin , higher RM cost and maintenance shutdowns drags down overall performance
Coromandel International (CRIN) reported a weak performance on the back of margin contraction in Fertilizer segment due to higher RM cost, lower volumes, and maintenance shutdowns. Price rise in complex Fertilizer, on rising phosphoric acid prices (prices have increased by 64 per cent YoY and 26 per cent QoQ in 1QFY22), remains a key monitorable going forward. On the back of margin pressures in the Fertilizer segment on higher RM prices, we have reduced our FY22E/FY23E earnings estimates by 10 per cent/4 per cent Maintain Buy.
Higher RM prices to weigh on near-term performance
CRIN reported a revenue of Rs 28.6 Billion in 4Q FY21 (flat YoY; v/s our estimate of Rs 26.2billion). Fertilizer volumes declined 6 per cent YoY on lower NPK manufacturing volumes (-12 per cent YoY). However, the same was offset by a 64 per cent increase in SSP (Single Superphosphate) volumes.
The Crop Protection segment grew 17 per cent YoY to Rs 5.2 billion, while the Nutrient and Other Allied Business segment fell 3% to INR23.7b. EBIT margin contracted 430bp/100bp to 8.5 per cent /12.5 per cent in the Nutrient and Other Allied Business/Crop Protection.
EBITDA margin contracted 450bp to 9.1 per cent (v/s our estimate of 13.3%) due to a decline in gross margin. EBITDA fell 33 per cent YoY to Rs 2.6b (v/s our expectation of INR3.5b). Adjusted PAT declined 33 per cent YoY to Rs 1.6b (v/s our estimate of Rs 2.2billion).
Highlights from the management commentary
Subsidy outstanding as on Mar’21 stood at INR5.9b (v/s INR23.2b in Mar’20). Subsidy outstanding includes INR3.3b relating to channel stock pending post acknowledgement.
In 4QFY21, subsidy received from the government stood at INR29.4b (v/s INR1b in 4QFY20). Subsidy received in FY21 stood at INR50.4b (v/s INR24.2b in FY20).
Crop Protection: CRIN increased focus on the domestic market in 4QFY21 with the launch of new products. Domestic margin is robust. However, it faced margin pressure on the global front, leading to slight margin contraction in 4QFY21. Also, higher freight cost and lower availability of containers added to expenses. Coromandel International 1 May 2021 2 n Capex: CRIN plans to spend INR5-6b in FY22. Several projects from FY21 have been postponed to FY22. Also, maintenance capex is pegged at Rs 1-1.2billion. Currently, the management intends to focus on backward integration of its sulphuric acid plant.
