3 November 2014
2QFY15 Results Update | Sector:
Fertilizers
Coromandel Intl.
BSE SENSEX
27,860
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
8,324
CRIN IN
285.8
94.0/1.5
340/196
3/26/18
CMP: INR329
TP: INR400
Buy
Financials & Valuation (INR Billion)
Y/E MAR
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2015E 2016E 2017E
108.6
9.2
4.5
15.4
19.3
87.2
18.6
21.6
21.4
3.8
127.4
11.5
6.5
22.3
45.0
102.4
23.6
26.1
14.8
3.2
147.5
13.3
7.9
27.3
22.1
121.2
24.4
Revenue growth in line, margins beat estimates:
Overall revenue grew 7.8% YoY to
INR34.7b (our estimate: INR34.7b). EBITDA margin expanded 110bp YoY to 10% (our
estimate: 8.9%) primarily due to 50bp gross margin expansion and 50bp decrease in
other expenses. Fertilizer volumes grew by 8% and margins stood at ~INR2,700/MT,
as the company took a blended price increase of 5% during the quarter. Reported PAT
grew 12.4% YoY to INR1.8b (our estimate: INR1.7b). Non-subsidy business reported
mixed performance with overall growth of ~5%, with Sabero posting robust 23%
growth while the performance of domestic agro-chemicals and MGC stores was
impacted due to weak rainfall and demand in AP/Telangana. Additionally, gypsum
sales during the quarter also declined due to lower demand from cement
manufacturers. The non-subsidy business contributed 18% and 36% to revenues and
EBITDA respectively.
Market share gains to further drive growth; margins to improve:
CRIN’s market
share in complex fertilizers expanded from 24% to 29%. With focus on customized
28.9
products and investments in the
Gromor
brand, the management is confident of
12.1
2.7
further market share gains. Further, due to normalization of channel inventories and
higher capacity utilization (~83% capacity utilization in FY16 v/s 65% in FY14), we
believe CRIN will outpace industry growth. Due to Cyclone Hudhud, production at the
Vizag facility has been impacted (50% of normal production for October), but this is
unlikely to materially impact full-year growth due to sufficient inventories. Focus on
complexes as against DAP, along with revival of demand for domestic agro-chemicals
and higher gypsum sales will boost aggregate margins.
Maintain Buy:
We like CRIN for its focus on the more lucrative complex fertilizers
space and its initiatives to diversify from a pure fertilizer business to a broader,
agricultural inputs business. We expect earnings CAGR of 30% over FY14-17. With
capex being limited to INR1b, we expect RoCE to improve from 16.6% to 28.9% and
RoE from 16.3% to 24.4%. Maintain
Buy
with a revised TP of INR400 (18x FY16E EPS).
Atul Mehra
(Atul.Mehra@MotilalOswal.com); +91 22 3982 5417
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
Investors are advised to refer through disclosures made at the end of the Research Report.

Coromandel Intl.
Revenue growth in line, Margins beat estimates
Coromandel reported overall revenue of INR34.7b (est INR34.7b) in 2QFY15 as
against INR32.1b in 2QFY14 marking a YoY growth of 7.8%.
Coromandel’s complex fertilisers sales were 0.93MT (+12% YoY, mfd 0.79 MT,
traded 0.14MT). Liberty volumes were up by ~23% to 160 kt. Urea trading
volumes were down by 8.6% to 205 kT.
The non-subsidy business contributed 18% and 36% to revenues and EBITDA.
EBITDA margins expanded by 110bp from 8.9% in 2QFY14 to 10.0% (est 8.9%) in
2QFY15 primarily due to 50bp improvement in gross margins and 50bp decrease
in other expenses. Fertilizer margins stood at ~INR2,700/MT. However
management continues to guide for full year margins at ~INR2,200-2300/MT
while re-iterating that quarterly margins are not suggestive of full year margins.
Reported PAT grew from INR1.6b in 2QFY14 to INR1.8b (est INR1.7b) in 2QFY15
marking a growth of 12.4% YoY.
CRIN has been able to increase in market share in complex fertilizers from 24%
to 29% over the past one year.
Going forward, with a focus on customized products, investments in the Gromor
brand, management is confident of further market share gains.
Additionally, excess inventories in the market have declined from 5m tonnes at
the beginning of FY14 to 0m tonnes at the exit of 2QFY15. As a result, we expect
growth for the industry to pick-up going forward to 10-15% growth due to pick-
up in consumption levels amidst weak base (period of inventory correction).
Due to Cyclone Hudhud, production at the Vizag facility has been impacted (50%
of normal production for the month of October), however this is unlikely to
materially impact full year growth outlook due to sufficient inventories.
Exhibit 1: Revenues growth in line with expectations at 8%
Revenue (INRm)
32,154
18,977
20%
14%
2%
1QFY14
2QFY14
3QFY14
5%
4QFY14
-1%
1QFY15
8%
Growth YoY (%)
34,660
27,562
21,840
18,807
2QFY15
Source: Company, MOSL
Exhibit 2: EBITDA margins improve 110bp YoY to 10.0%
EBITDA (INRm)
8.9%
5.8%
EBITDA Margins (%)
10.0%
8.0%
8.2%
6.5%
Exhibit 3: PAT beats estimates, up 12% YoY (est 7.6% growth)
PAT (INRm)
5.0%
3.4%
1.1%
3.7%
1.7%
1,601
2QFY14
942
3QFY14
808
4QFY14
326
1QFY15
1,799
2QFY15
PAT Margin (%)
5.2%
1,092
1QFY14
2,850
2QFY14
2,192
3QFY14
1,792
4QFY14
1,220
1QFY15
3,467
2QFY15
214
1QFY14
Source: Company, MOSL
3 November 2014
Source: Company, MOSL
2

Coromandel Intl.
Sabero reports robust revenue growth; margins decline YoY
Revenues at INR2,707 as against INR2,203m marking a YoY growth of 23%.
Sabero EBITDA stood at INR287m as against INR270m marking a YoY growth of
6.4%, EBITDA margins declined 160bp YoY to 10.6%.
PAT for the quarter stood at INR119m as against INR164, decline of 27% YoY
primarily due to higher tax rate (36% as against 0.2%).
Sabero shareholders will get Coromandel shares in the ratio 5:8 post merger.
Exhibit 4: Revenues growth robust at 23%
Revenue (INRm)
1,809
2,203
44%
1,605
33%
22%
1,622
32%
22%
23%
2,201
Growth YoY (%)
2,707
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
Source: Company, MOSL
Exhibit 5: EBITDA margins declined 160bp YoY to 10.6%
EBITDA (INRm)
10.9%
12.2%
9.5%
9.4%
EBITDA Margins (%)
11.0%
10.6%
Exhibit 6: PAT de-grew 27% YoY due to higher tax rate
PAT (INRm)
7.4%
5.2%
2.3%
PAT Margin (%)
4.3%
1.7%
28
4QFY14
96
1QFY15
4.4%
196
1QFY14
270
2QFY14
152
3QFY14
152
4QFY14
241
1QFY15
287
2QFY15
95
1QFY14
164
2QFY14
37
3QFY14
119
2QFY15
Source: Company, MOSL
Source: Company, MOSL
Exhibit 7: Sabero Quarterly Earnings Model
Source: Company, MOSL
3 November 2014
3

Coromandel Intl.
Other non-subsidy businesses impacted by poor monsoons
Non-subsidy business ex-Sabero reported weak performance with domestic
agro-chemicals revenues declining and non-fertilizer revenue of MGC stores also
getting impacted due to weak rainfall and demand in AP / Telangana regions.
Additionally, gypsum sales during the quarter also declined due to lower
demand from cement manufacturers.
CRIN has a capacity of ~4m tonnes for P&K fertilizers.
Management re-iterated that in the absence of unforeseen circumstances,
capacity utilization in FY16 can be ramped up to 85-90% thus driving strong
volume and revenue growth.
We expect CRIN’s fertilizer business to grow at a CAGR of 12% over FY14-17,
driven by increase in capacity utilization from 65% to 83%.
Capacity (m MT)
76%
58%
65%
Capacity Utilization (%)
68%
72%
83%
Capacity utilization set to improve driving revenue growth
Exhibit 8: Capacity utilization to improve from 65% in FY14 to 86% in FY17
3.3
FY12
3.2
FY13
3.6
FY14
3.6
FY15E
3.9
FY16E
3.9
FY17E
Source: Company, MOSL
Exhibit 9: Fertilizer revenues to post 12% CAGR over FY14-17, led by higher utilization
30%
Fertilizer revenues (INR m)
Growth (%)
16%
7%
4%
14%
-13%
83,673
FY12
72,875
FY13
77,935
FY14
81,412
FY15E
94,460
FY16E
107,648
FY17E
Source: Company, MOSL
Other call highlights
3 November 2014
Gross debt as of 2QFY15 stood INR23.5b. Subsidy receivables stand at INR11b.
Management has strengthened its credit mechanism in the market with an
average of 30 days credit days as against 45 to 60 days in FY14. Going forward,
management is looking to move to Cash and carry model as per earlier trend.
Crude price correction should ideally result in lower ammonia prices, however
right now ammonia prices continue to remain high.
Gas price hike to have minimal impact on CRIN’s cost structure.
Discounts in the market are at normal levels of INR450/MT.
Phosphoric acid prices are stable QoQ at USD715/MT.
4

Coromandel Intl.
Story in charts: Best play in fertilizers
1.
2.
3.
4.
5.
6.
India has the lowest fertilizer penetration.
NPK ratio skewed at 7.7:3:1 against ideal ratio of 4.2:2:1.
Revenue growth set to accelerate due to higher utilization.
Dependence on subsidy is declining every year.
Non-subsidy business contribution to rise to 45%.
RoE set to improve to 24% in FY17E.
Exhibit 11: NPK ratio skewed at 7.7:3:1 v/s ideal of 4.2:2:1
N
5.9
5.5
P
K
6.9
4.6
4.3
2.0
1.0
2010
4.3
3.1
2.1
1.0
2008
1.6
1.0
2009
2.0
1.0
2011
1.0
2012
1.0
2013
3.0
7.7
Exhibit 10: India has the lowest fertilizer penetration
Country-wise Fertiliser Consumption (Kgs/ha)
333
275
166
128
133
2.4
1.0
India
Brazil
Pakistan
Japan
China
2007
Source: MOSL, Company
Source: MOSL, Company
Exhibit 12: Revenue growth set to accelerate
Capacity (m MT)
76%
58%
Capacity Utilization (%)
70%
73%
83%
Exhibit 13: Dependence on subsidy is declining every year
Subsidy as a percentage of total realization
Farmgate price as a percentage of total realization
65%
37%
40%
48%
63%
65%
63%
60%
52%
3.3
FY12
3.2
FY13
3.6
FY14
3.6
FY15E
3.9
FY16E
3.9
FY17E
Pre NBS
FY11
FY12
37%
FY13
35%
FY14
Source: MOSL, Company
Source: MOSL, Company
Exhibit 14: Non-subsidy business contribution to rise to 45%
Phosphatic Fertilisers
30%
30%
36%
Non-subsidy business
Exhibit 15: RoE set to improve to 24% in FY17E
RoE (%)
22.9
24.2
18.8
39%
42%
45%
16.3
17.9
70%
70%
64%
61%
58%
55%
FY12
FY13
FY14
FY15E
FY16E
FY17E
FY13
FY14
FY15E
FY16E
FY17E
Source: MOSL, Company
Source: MOSL, Company
3 November 2014
5

Coromandel Intl.
Coromandel Intl.: an investment profile
Company description
Coromandel International (CRIN) is the flagship
company of the Murugappa Group and is a subsidiary of
EID Parry (India) Limited (EIDP), which holds 62.56% of
its equity. CRIN has multi-locational production
facilities, and manufactures and markets a wide range
of phosphatic fertilizers, crop protection products,
specialty nutrients like sulphur pastelles, water-soluble
fertilizers, micronutrients, and organic fertilizers. It
exports its crop protection products to countries across
the globe. CRIN also provides agricultural
inputs/solutions and offers lifestyle products through its
rural retail centers, branded
Mana Gromor Centers.
Fertilizer business contributed 80% of revenue and 64%
of EBITDA in FY14, while the plant protection business
contributed 20% of revenue and 36% of EBITDA.
Higher capacity utilization to drive growth in
fertilizer business:
We expect CRIN’s fertilizer
business to grow at a CAGR of 12% over FY14-17,
driven by increase in capacity utilization from 65%
in FY14 to 83% in FY17E.
Profitability mix to improve in favor of non-
subsidy business:
By FY17, we expect the EBITDA
contribution of non-subsidy business increase from
36% to 45%. The shift in EBITDA mix in favor of the
more lucrative non-subsidy business would
enhance the return on capital for the company.
Key investment risks
Change
in the government’s subsidy policies.
Valuation and view
Key investments arguments
Growth set to bounce back; inventory situation has
improved:
Inventory situation for DAP and complex
fertilizers has improved significantly. Excess
inventories in the market have declined from 5m
tonnes at the beginning of FY14 to 2m tonnes at the
exit of FY14. Restoration of NPK consumption ratio
and normalization of inventories would support
higher offtake for CRIN products over FY14-17.
We like CRIN for its focus on the more lucrative
complex fertilizers space and its initiatives to
diversify from a pure fertilizer business to a
broader, agricultural inputs business.
We expect earnings CAGR of 30% over FY14-17.
With capex being limited to INR1b, we expect RoCE
to improve from 16.6% to 28.9% and RoE from
16.3% to 24.4%.
Maintain
Buy
with a revised price target of INR400,
valuing the stock at 18x FY16E.
Target price and recommendation
Current
Price (INR)
329
Target
Price (INR)
400
Upside
(%)
21.6
Reco.
Buy
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY15
FY16
15.4
22.3
Consensus
Forecast
18.1
22.5
Variation
(%)
-14.8
-0.8
Shareholding pattern (%)
Sep-14
Promoter
DII
FII
Others
63.2
5.6
6.7
24.6
Jun-14
63.2
5.8
7.0
24.0
Sep-13
63.8
7.0
6.6
22.6
Stock performance (1-year)
Note: FII Includes depository receipts
3 November 2014
6

Coromandel Intl.
Financials and valuations
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2014
100.5
11.3
8.1
8.0
1.0
7.1
2.4
0.6
0.1
5.2
1.5
29.4
3.6
3.7
-15.4
-0.1
3.7
2015E
108.6
8.0
9.2
8.5
1.0
8.3
2.3
0.7
0.0
6.7
2.2
33.0
4.5
4.5
22.6
0.0
4.5
(INR Billion)
2016E
127.4
17.3
11.5
9.0
1.0
10.4
1.5
0.8
0.0
9.7
3.2
33.0
6.5
6.5
45.0
0.0
6.5
2017E
147.5
15.7
13.3
9.0
1.1
12.2
1.3
0.9
0.0
11.8
3.9
33.0
7.9
7.9
22.1
0.0
7.9
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2014
12.9
16.3
80.6
4.5
42.0
25.6
20.3
4.1
1.1
13.3
1.4
16.3
16.6
2.3
53.0
63.6
106.9
0.5
2015E
15.4
18.8
87.2
5.5
42.8
21.4
17.6
3.8
1.0
11.4
1.7
18.6
21.6
2.4
53.0
64.6
107.5
0.3
2016E
22.3
25.9
102.4
6.0
32.2
14.8
12.7
3.2
0.8
9.0
1.8
23.6
26.1
2.7
53.0
64.6
108.1
0.2
2017E
27.3
31.0
121.2
7.0
30.8
12.1
10.6
2.7
0.7
7.5
2.1
24.4
28.9
3.0
53.0
64.6
108.1
0.1
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2014
0.3
22.5
22.8
18.4
2.4
43.8
22.1
8.2
13.9
0.7
3.4
54.5
17.5
14.8
4.7
17.5
32.7
30.7
1.9
21.9
43.8
2015E
0.3
25.1
25.4
16.4
2.4
44.4
23.8
9.2
14.6
0.0
3.4
57.9
19.2
16.0
4.8
17.9
35.4
33.2
2.2
22.4
44.4
(INR Billion)
2016E
2017E
0.3
0.3
29.5
35.0
29.8
35.3
14.4
11.4
2.4
2.4
46.8
49.3
24.8
25.8
10.2
11.3
14.6
14.5
0.0
0.0
3.4
3.4
66.3
75.4
22.6
26.1
18.8
21.8
5.0
5.7
19.9
21.8
41.4
48.0
39.0
45.1
2.5
2.9
24.9
27.5
46.8
49.3
E: MOSL Estimates
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
5.2
1.0
0.0
1.9
-1.1
6.7
14.6
-1.1
-1.0
1.9
-0.2
0.0
-9.2
-2.6
-1.5
-13.4
1.0
3.8
4.7
2015E
6.7
1.0
0.0
1.6
-2.2
-0.5
6.5
-1.0
0.0
0.7
-0.3
0.0
-2.0
-2.3
-1.9
-6.2
0.0
4.7
4.8
(INR Billion)
2016E
9.7
1.0
0.0
0.7
-3.2
-2.2
6.1
-1.0
0.0
0.8
-0.2
0.0
-2.0
-1.5
-2.1
-5.6
0.3
4.8
5.0
2017E
11.8
1.1
0.0
0.4
-3.9
-1.9
7.5
-1.0
0.0
0.9
-0.1
0.0
-3.0
-1.3
-2.4
-6.7
0.7
5.0
5.7
3 November 2014
7

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Coromandel Intl.
invitation or inducement to
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