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SYNOPSIS

Coromandel International Limited is in the business segments of Fertilisers, Speciality Nutrients, Crop Protection and Retail. The Company is manufactures a wide range of fertilisers and markets around 2.9 million tons making it a leader in its addressable markets and the second largest phosphatic fertiliser player in India. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 18% over 2010 to 2013E respectively. The Company clocked a turnover of Rs.7,528 crore in 2010-11 (USD 1.68 billion as on March 31, 2011). Coromandel is a part of the Rs.17,051 crores (USD 3.8 billion as on March 31, 2011) Murugappa Group. Coromandel is the second largest manufacturer of Malathion and only the second manufacturer of Phenthoate. The Company has signed an agreement with Qatar Fertiliser Company (QAFCO) for supply of Urea. Coromandel International Limited has signed definitive share purchase agreement to acquire promoters stake in 'Sabero Organics Gujarat Limited.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 76363.80 11344.20 6944.60 24.64 13.80

FY 12E 80945.63 11126.74 7199.33 25.55 13.31

FY 13E 87421.28 11731.64 7595.72 26.95 12.61

Stock Data:

Sector: Fertilizers

Face Value Rs. Rs.1.00

52 wk. High/Low (Rs.) 746.05/217.50

Volume (2 wk. Avg.) 14000

BSE Code 506395

Market Cap (Rs.In mn) 95812.00

Share Holding Pattern

1 Year Comparative Graph

Coromandel

International Ltd BSE SENSEX

C.M.P : Rs.340.00 Target Price : Rs.384.00 Date : 16th July 2011 BUY

COROMANDEL INTERNATIONAL LTD

Result Update: Q4 FY 11

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Coromandel Intl 340.00 95812.00 24.64 13.80 5.03 700.00

National Fert 91.50 44887.9 2.82 32.45 2.61 10.50

Rashtriya Chem 77.80 42921.3 4.44 17.52 2.06 11.00

Gujarat State Fert 369.45 29443.5 94.03 3.93 1.02 45.00

Investment Highlights

Q4 FY11 Results Update

Coromandel International Ltd disclosed results for the quarter ended March 2011.

Net sales for the quarter moved down 8% to Rs.12489.60 million as compared to

Rs.13647.70 million during the corresponding quarter last year. During the

quarter, the company has reported Net Profit decreased to Rs.726.20 million from

Rs.820.70 million in previous year same quarter. The Basic EPS of the company

stood at Rs.2.58 for the quarter ended March 2011.

Quarterly Results - Standalone (Rs in mn)

As At March-11 March-10 %change

Net sales 12489.60 13647.70 (8)

PAT 726.20 820.70 (12)

Basic EPS 2.58 5.85 (56)

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Basic EPS of the company stood at Rs.2.58

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Break up of Expenditure

Expenditure for the quarter stood at Rs.11501.00 mn, which is around 8% lower

than the corresponding period of the previous year. Consumption of Raw

Materials cost of the company for the quarter accounts for 79% of the sales of the

company and stood at Rs.9824.30mn from Rs.6830.00mn of the corresponding

period of the previous year. Other Expenditure Cost increased 34%YoY to

Rs.2019.3mn from Rs.1506.20mn and accounts for 16% of the revenue of the

company for the quarter.

OPM and NPM for the quarter stood at 9% and 6% respectively from 11% and 6%

respectively of the same period of the last year.

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FY11 Performance

Net profit of the company has increased at 48% yoy Rs.6944.60mn from

Rs.4682.00mn of same period of last year. Total revenue for the year stood at

Rs.76363.80 mn from Rs.63947.30 which is 19% increased than that of a year ago.

Total Income has increased from Rs 77161.40 million for the year ended March 31,

2011 to Rs 65268.40 million for the year ended March 31, 2010.EPS for the year

stood at Rs.24.64 per equity share of Rs.1.00 each.

Operating profit of the company stood at Rs.11344.20mn. OPM for the year stood

at 14.86%. Expenditure of the company increased 16% YoY to Rs.65817.20 mn.

Interest expenses for the year stood at Rs.842.20mn.

Board recommends Dividend

Coromandel International Ltd has recommended Final dividend of Rs. 3.00 on

the face value of Rs.1.00 for the year 2011.

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Allotment of Equity Shares

Coromandel International Ltd has allotted 96160 equity shares of Re. 1/- each

fully paid to the employees pursuant to ESOP 2007. Consequent to this

allotment, the issued and paid up capital of the Company stands revised to

281999680 equity shares of Re. 1/- each fully paid amounting to Rs.

281999680/-.

Coromandel inks pact with QAFCO for supply of Urea

Coromandel International Limited has signed an agreement with Qatar

Fertiliser Company (QAFCO) for supply of Urea. QAFCO is a leading Ammonia,

Urea and Melamine manufacturer with state of art facilities for manufacturing

Urea, Ammonia and Melamine using Natural Gas.

Qatar Fertiliser Company is one of the largest producers of Urea and Ammonia

and currently producing around 3 million tonnes of Prilled/granular Urea. With

current expansion going on with Qafco 5 & 6, the Company will become the

largest single-site producer of Ammonia and Urea in the world with Ammonia

capacity of 3.8 million tonnes and Urea capacity of 5.6 million tonnes.

Coromandel International acquires 'Sabero Organics

Coromandel International Limited has signed definitive share purchase

agreement to acquire promoters stake in 'Sabero Organics Gujarat Limited', an

established agrochemical manufacturer headquartered in Mumbai, India. last

year.

Sabero Organics is a leading producer and supplier of a variety of fungicides,

herbicides, insecticides and specialty chemicals and is a significant player in

Mancozeb fungicide in global markets. Current Turnover of the Company is Rs.

413 Crores in FY 11, out of which the exports contribute about Rs. 220 Crores.

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Company Profile

Coromandel International Limited is in the business segments of Fertilisers, Speciality

Nutrients, Crop Protection and Retail. Coromandel manufactures a wide range of

fertilisers and markets around 2.9 million tons making it a leader in its addressable

markets and the second largest phosphatic fertiliser player in India.

In its endeavour to be a complete plant nutrition solutions company, Coromandel has

also introduced a range of Speciality Nutrient products including Organic Fertilisers.

The Crop Protection business produces insecticides, fungicides and herbicides and

markets these products in India and across the globe. Coromandel is the second

largest manufacturer of Malathion and only the second manufacturer of Phenthoate.

Coromandel has also ventured into the retail business setting up more than 425 rural

retail centers in the agri and lifestyle segments.

The Company clocked a turnover of Rs.7,528 crore in 2010-11 (USD 1.68 billion as on

March 31, 2011).

Coromandel was ranked among the top 20 best companies to work for by Business

Today and was also voted as one of the ten greenest companies in India by TERI,

reflecting its commitment to the environment and society.

Coromandel is a part of the Rs.17,051 crores (USD 3.8 billion as on March 31, 2011)

Murugappa Group.

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Company Products & Services

Coromandel International Limited has multi-locational production facilities and

markets its products all over India and exports pesticides to various countries across

the globe. It is managed by competent and committed professionals using advanced

management practices. The Company is known for fostering a climate of high

performance and continuous improvement.

Fertilizers

Gromor 14-35-14

Gromor 28-28-0

Gromor 20-20-0-13

Paramfos 16-20-0-1

ParryGold

Parry Super (Single Super Phospate)

Godavari DAP

Godavari 10:26:26

Godavari 12:32:16

GODAVARI 14:35:14

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Plant Protection Chemicals

Coromandel manufacture & market pesticides Including Insecticides, Fungicides,

Herbcidies and Plant Biostimulant. The company’s Pesticide portfolio includes several

popular brands that enjoy leadership status in the Indian Market. Coromandel

constantly Engages in reviewing its products mix , to give the best fit for the every kind

and Coromandel has a strong R&D team for developing technologically superior and

environmentally safe pesticides formulations like SC, WDG, Gel Micro emulsions etc's.

By providing wide range of Farm inputs that cater to different types of requirements,

the company has endeared itself to the farmers, deservedly earning a place in his

heart as a real friend in need. Coromandel exports their products to various counties.

Coromandel have technical tie-ups with Multinationals like Dupont, BASF, FMC,

Otsuka , etc for marketing their products in India.

Specialty Nutrients

Introduction of high yielding crop varieties (HYV), intensive cropping together with a

shift in high analysis NPK fertilizers in mid sixties brought a stirring revolution in

increasing crop production in the country, but at the same time heavy withdrawal of

essential plant nutrients through bumper harvests made soil resource fatigue. The

deficiencies of micronutrients became a serious obstacle in achieving optimum

yield.The intensification of agriculture in India has led to the increasing removal of

secondary and micronutrients from the soil and multiple nutrient deficiencies, which

are becoming a major constraint to further increases in production.This is essentially

due to nutrient removals far in excess of nutrient additions. Greatest blame for soil

nutrient depletion rests with unbalanced fertilizer application consisting of large N

applications without matching amount of other nutrients.

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Organic Fertilisers

Retail

Partners

Coromandel has strategic partnerships with leading companies across the globe

including:

FOSKOR (PTY) LTD., South Africa

A Technical Assistance Agreement with Foskor (Pty) Ltd. of South Africa, one of the

largest phosphoric acid producing companies, for extending Coromandel's technical

assistance.

Groupe Chimique Tunisian,Tunisia

A joint venture agreement with Groupe Chimique Tunisien (GCT) and CPG of Tunisia

to set up a phosphoric acid plant at La Skhira, Tunisia, at an estimated cost of US$

180 million.

Sociedad Quimicay Minera

A 50:50 joint venture with Sociedad Quimicay Minera to set up a Water Soluble

Fertiliser (WSF) plant for manufacturing WSF at Coromandel's Kakinada Plant.

Subsidiary Companies

Coromandel Mauritius

Coromandel GETAX Phosphates Pvt.Ltd

Coromandel Brasil Limited

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in million) FY10A FY11A FY12E FY13E

12m 12m 12m 12m

Description

Net Sales 63947.30 76363.80 80945.63 87421.28

Other Income 1321.10 797.60 765.70 803.98

Total Income 65268.40 77161.40 81711.32 88225.26

Expenditure -56838.00 -65817.20 -70584.59 -76493.62

Operating Profit 8430.40 11344.20 11126.74 11731.64

Interest -753.70 -842.20 -891.71 -936.30

Gross Profit 7676.70 10502.00 10235.02 10795.34

Depreciation -592.30 -617.40 -635.92 -667.72

Profit before Tax 7084.40 9884.60 9599.10 10127.62

Tax -2402.40 -2940.00 -2399.78 -2531.91

Profit after Tax 4682.00 6944.60 7199.33 7595.72

Equity Capital 280.50 281.80 281.80 281.80

Reserves 14069.30 18759.30 25958.63 33554.34

Face Value(Rs.) 2.00 1.00 1.00 1.00

EPS 33.38 24.64 25.55 26.95

*A=Actual, *E=Estimated

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in million) 30-Sep-10 30-Dec-10 30-Mar-11 30-Jun-11

3m(A) 3m(A) 3m(A) 3m(E)

Description

Net Sales 27733.60 20612.40 12489.60 13738.56

Other Income 206.30 187.90 195.60 176.04

Total Income 27939.90 20800.30 12685.20 13914.60

Expenditure -22417.30 -18264.20 -11501.00 -11952.55

Operating Profit 5522.60 2536.10 1184.20 1962.05

Interest -226.20 -211.80 -219.40 -230.37

Gross Profit 5296.40 2324.30 964.80 1731.68

Depreciation -165.40 -161.40 -148.60 -139.68

Profit before Tax 5131.00 2162.90 816.20 1592.00

Tax -1630.00 -660.00 -90.00 -398.00

Profit after Tax 3501.00 1502.90 726.20 1194.00

Equity Capital 281.30 281.70 281.80 281.80

Face Value(Rs.) 2.00 1.00 1.00 1.00

EPS 24.89 5.34 2.58 4.24

*A=Actual, *E=Estimated

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Key Ratio

Particulars FY10 FY11 FY12E FY13E

EPS (Rs.) 33.38 24.64 25.55 26.95

EBITDA Margin (%) 13.18% 14.86% 13.75% 13.42%

PAT Margin (%) 7.32% 9.09% 8.89% 8.69%

P/E Ratio (x) 14.61 13.8 13.31 12.61

ROE (%) 32.63% 36.47% 27.44% 22.45%

ROCE (%) 24.08% 32.76% 25.82% 22.61%

EV/EBITDA (x) 8.11 8.45 8.61 8.17

Debt-Equity Ratio 1.27 0.72 0.55 0.45

Book Value (Rs.) 102.32 67.57 93.12 120.07

P/BV 4.77 5.03 3.65 2.83

Charts:

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Outlook and Conclusion

At the current market price of Rs.340.00, the stock is trading at 13.31 x FY12E and 12.61 x FY13E respectively.

Price to Book Value of the stock is expected to be at 3.65 x and 2.83 x respectively for FY12E and FY13E.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.25.55 and Rs.26.95 respectively.

The Company is manufactures a wide range of fertilisers and markets around 2.9 million tons making it a leader in its addressable markets and the second largest phosphatic fertiliser player in India.

Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 18% over 2010 to 2013E respectively.

The Company clocked a turnover of Rs.7,528 crore in 2010-11 (USD 1.68 billion as on March 31, 2011).

Coromandel is a part of the Rs.17,051 crores (USD 3.8 billion as on March 31, 2011) Murugappa Group.

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Coromandel is the second largest manufacturer of Malathion and only the second manufacturer of Phenthoate.

The Company has signed an agreement with Qatar Fertiliser Company (QAFCO) for supply of Urea.

Coromandel International Limited has signed definitive share purchase agreement to acquire promoters stake in 'Sabero Organics Gujarat Limited.

On the basis of EV/EBITDA, the stock trades at 8.61 x for FY12E and 8.17 x for FY13E.

We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.384.000 for Medium to Long term investment.

Industry Overview

Fertilizer sector

� The Indian fertilizer industry has succeeded in meeting almost fully the demand

of all chemical fertilizers except for MOP. The industry had a very humble

beginning in 1906, when the first manufacturing unit of Single Super

Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity of

6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at Cochin

in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were

the first large sized -fertilizer plants set up in the forties and fifties with a view

to establish an industrial base to achieve self-sufficiency in food grains.

Subsequently, green revolution in the late sixties gave an impetus to the growth

of fertilizer industry in India. The seventies and eighties then witnessed a

significant addition to the fertilizer production capacity.

� Fertilizer sector is a very crucial for Indian economy because it provides a very

important input to agriculture. The fertilizer industry in India has played a

pivotal role in achieving self – sufficiency in food grains as well as in rapid and

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sustained agriculture growth. India is the third largest producer and consumer

of fertilizers in the world after China and the United States. The growth of the

Indian fertilizer industry has been largely determined by the policies pursued by

the government. The government exercised extensive controls on the pricing,

distribution and movement of fertilizers. The industry is capital intensive and

the production process energy intensive with the combined cost of feedstock

and fuel accounting for anywhere between 55 and 80 per cent of cost of

production, depending on the type of fertilizers.

Determinants of Fertilize Demand

• Rainfall and irrigation facilities

• Relative prices of fertilizers

• Cropping pattern

• Government policies

Rising demand for fertilizers

� There has been significant growth in the consumption of fertilizers in last three

years due to overall good monsoon. The growth in NPK consumption was 9.50%

in 2004-05, 10.60 % in 2005-06 and 8.40% per cent in 2006-07.Against the

robust growth in consumption, domestic fertilizer production has remained

range – bound in the last decades. The surge in fertilizers demand and stagnant

to modest increase in production has widened the gap between consumption

and production causing larger dependence on imports. Therefore, the rising

demand for fertilizers is providing ample scope for the companies in this sector

to increase their production capacity and volumes thereby, driving the growth

of fertilizer sector.

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� The installed capacity as on 30.01.2003 has reached a level of 121.10 lakh MT

of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after

reassessment of capacity) and 53.60 lakh MT of phosphatic nutrient, making

India the 3rd largest fertilizer producer in the world. The rapid build-up of

fertilizer production capacity in the country has been achieved as a result of a

favorable policy environment facilitating large investments in the public, co-

operative and private sectors. Presently, there are 57 large sized fertilizer plants

in the country manufacturing a wide range of nitrogenous, phosphatic and

complex fertilizers. Out of these, 29 unit produce urea, 20 units produce DAP

and complex fertilizers 13 plants manufacture Ammonium Sulphate (AS),

Calcium Ammonium Nitrate (CAN) and other low analysis nitrogenous

fertilizers. Besides, there are about 64 medium and small-scale units in

operation producing SSP

� The Indian fertilizer industry has come a long way since its early days post

independence. India today is one of the largest producer and consumer of

Fertilizers in the world. India’s production in terms of nutrients (N & P) reached

a level of 155 lakh MT in 2005-06 from 0.39 lakh MT in 1951-52. Similarly,

consumption of fertilizers in terms of nutrients (NPK) has also grown from

about 0.66 lakh MT in 1951-52 to nearly 184 lakh MT in 2004-05.

� The Indian Fertilizer industry, given its strategic importance in ensuring self–

sufficiency of food grain production in the country, has for decades, been under

Government control. The Government has over the years, provided subsidies/

concessions through the fertilizer companies to farmers and the manufacturers

have been compensated through various schemes. Though the Government

control helped in meeting the objective of ensuring creation of capacities and

ultimately achieving self-sufficiency in food grain production, it did not

encourage improving efficiencies in the sector.

� Burgeoning subsidy bill and the need to focus on fiscal prudence, Government

polices in recent times are aimed at encouraging efficiencies in the sector. Policy

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measures like the new pricing scheme have made the operations of less efficient

players unviable. The Government polices today are oriented towards achieving

the stated objective of total deregulation in the sector. However, the uncertainty

over exact policy parameters and absence of a comprehensive long term policy

has not augured well for the industry. The financial year 2006-07 began with

practically no clarity on the policy parameters for both nitrogenous and

phosphatic fertilizers.

� Another important issue confronting the sector is with respect to the feedstock.

Natural gas which is the main feedstock for production of nitrogenous fertilizers

is available in limited quantities and the industry competes with the power

sector for its share. With the Government policy favoring conversion to gas

based units, the demand for gas is only expected to go up in the future, which

may in turn lead to further shortages.

� The Indian fertilizer industry has come a long way since its early days post

independence. India today is one of the largest producer and consumer of

Fertilisers in the world. India’s production in terms of nutrients (N & P) reached

a level of 155 lakh MT in 2005-06 from 0.39 lakh MT in 1951-52. Similarly,

consumption of fertilizers in terms of nutrients (NPK) has also grown from

about 0.66 lakh MT in 1951-52 to nearly 184 lakh MT in 2004-05. The Indian

Fertilizer industry, given its strategic importance in ensuring self– sufficiency of

food grain production in the country, has for decades, been under Government

control.

� The Government has over the years, provided subsidies/concessions through

the fertilizer companies to farmers and the manufacturers have been

compensated through various schemes. Though the Government control helped

in meeting the objective of ensuring creation of capacities and ultimately

achieving self-sufficiency in food grain production, it did not encourage

improving efficiencies in the sector. With the burgeoning subsidy bill and the

need to focus on fiscal prudence, Government polices in recent times are aimed

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at encouraging efficiencies in the sector. Policy measures like the new pricing

scheme have made the operations of less efficient players unviable. The

Government polices today are oriented towards achieving the stated objective of

total deregulation in the sector. However, the uncertainty over exact policy

parameters and absence of a comprehensive long term policy has not augured

well for the industry. For instance, the financial year 2006-07 began with

practically no clarity on the policy parameters for both nitrogenous and

phosphatic fertilizers.

� Another important issue confronting the sector is with respect to the feedstock.

Natural gas which is the main feedstock for production of nitrogenous fertilizers

is available in limited quantities and the industry competes with the power

sector for its share. With the Government policy favouring conversion to gas

based units, the demand for gas is only expected to go up in the future, which

may in turn lead to further shortages. Similarly, in the case of phosphates, on

account of the limited availability of phosphoric acid and rock phosphate in the

country, domestic units are dependent to a large extent on imports. In view of

the limited availability of the main feedstock within the country, fertiliser

companies today are exploring the possibility of setting up joint ventures

abroad to tie up their feedstock requirements. Though a few joint venture

agreements have been signed with respect to supply of phosphoric acid, only a

couple of joint ventures have been established with respect to urea. Domestic

players have also not been able to enter into long term gas supply agreements

primarily due to differences over pricing.

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_______________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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