Buy Coromandel International, target Rs 910: Emkay Global

Emkay Global has given a buy rating to Coromandel International with a target price of Rs 910. The share price moved up by 0.83 per cent from its previous close of Rs 773.25. The stock’s last traded price is Rs 779.70. CRIN has increased its R&D spends by 25% in FY20. CRIN’s R&D spending is mainly for new product development in the crop protection (CP) segment. Since FY19, CRIN has been accelerating R&D spends. R&D spends increased 62%/25% in FY19/20. R&D spends now account for 1.2% of CRIN’s CP revenues in FY20 vs. 0.6%/0.9% in FY18/19. CRIN aims to launch 4-5 new products in the CP segment every year which indicates the company’s robust pipeline.

Financials
For the quarter ended 31-03-2020, the company reported a Consolidated sales of Rs 2869.32 Crore, down -12.48 % from last quarter Sales of Rs 3278.65 Crore and up 8.75 % from last year same quarter Sales of Rs 2638.34 Crore Company has reported net profit after tax of Rs 233.77 Crore in latest quarter.

Investment Rationale
The brokerage maintains Buy rating on CRIN with a TP of Rs 910, based on 19x Jun-22E EPS. CRIN’s focus on ROCE and cash flows have strengthened its balance sheet over the last five years with its nutrient segment ROCE doubling over the same period. With the focus on R&D, new launches and favorable base, the CP segment should see a turnaround in FY21. The brokerage remains UW on CRIN in sector EAP due to the recent run-up in the stock price but are confident of its long-term prospects.


Promoter/FII Holdings
Promoters held 61.6 per cent stake in the company as of March 31, 2020, while FIIs held 3.5 per cent, DIIs held 19.7 per cent and public and others 15.2 per cent.