Coromandel Fertilisers
A part of the Murugappa group, Coromandel Fertiliser has probably posted one of the best set of results for the third quarter ended 31st Dec 2008. Despite operating in a cyclical sector, the company has, through its strategic products and marketing , managed to emerge victorious.
One of the largest manufacturers of phosphatic/complex fertilisers with an extensive distribution network all over India, the company for Q3FY09 posted an unbelievable 290% jump in net sales at Rs 3726.25 crore. The increase in fertilizer production cost has resulted into higher subsidies, which in turn has led to an increase in revenues.
For the 9MFY09, its net sales was at Rs 8518.12 crore which has already surpassed 12MFY08 sales of Rs 3757.34 crore. There is one more quarter to go, so surely FY09 would be a bumper year.
EBITDA for Q3FY09 was up 50% at Rs 216.03 crore. The company declared an interim dividend of 300% on a face value of Rs 2 per share. As on 31st Dec 2008, EID Parry held 62.70% shares of the company and another 1.04% by the promoters and family. Institutions hold 13.44% stake thus leaving a very low floating stock in the market. A big positive in today’s time.
Coromandel Fertilisers bought out the 25% equity holding of IFFCO in Godavari Fertilisers and Chemicals for a total consideration of Rs 120 crore in April 2007. The acquisition of EID Parry’s farm inputs division and pesticide maker Ficom Organics have helped Coromandel spread out its products basket to now include not just pesticides but also fertilisers, crop protection products and micro-nutrients across India. These acquisitions have also helped add on an extensive distribution network for its agri-inputs, giving it a pan-India presence and that is the biggest strength of the company.
Apart from having a diverse product basket of agri-inputs, the company has also worked on keeping its raw material procurement costs under control. It has acquired a 2.5% stake in large global supplier like Foskor of South Africa for procuring key raw materials such as rock phosphate.
It also has formed a JV to produce phosphoric acid with Groupe Chimique Tunisien and till 31st Dec 2008, considering the nine month period; it has invested Rs 61.73 crore in equity capital of this JV.
The advantage of the flexible product mix, giving it the best advantage of the subsidy regime, the cost structure of the Coromandel is amongst the lowest in the phosphatic/complexes space. This also means that the company is better poised to compete with imported fertilisers.
Net profit for the third quarter current year was up 75% on a YoY at Rs 131.24 crore. More significantly, its 9MFY09 net profit was at Rs 506.12 crore, which is already three times way above the net profit of Rs 210.09 crore posted in FY08.
Even assuming a conservative growth rate of 25-30% for FY09 in net profit, it is expected to end the current fiscal with a bumper profit in the range of Rs 650-700 crore.
On an equity of Rs 27.98 crore, it’s EPS is estimated to be in the range of Rs 47 on a face value of Rs 2 per share.
At the current price of Rs 101.45, accumulate the stock, as the company is well poised to move ahead exponentially on the persisting deficit in phosphatic/complex fertilizers.
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