Coromandel Intl: Adjacencies gaining traction

19 Mar 2024 , 10:37 AM

While Coromandel International’s Q4 performance is likely to be weak because of seasonality and lower NBS subsidy, analysts of IIFL Capital Services meeting with the management highlight its ambitions for the adjacent businesses such as CDMO and Specialty Chemicals to drive growth in the medium-to-long term. Another focus area that is clearly visible is the tie-ups with agriculture-based start-ups that help increase service offerings to farmers. Thus, the medium-term outlook is steady as the company continues to invest in backward integration and evaluates opportunities in the Nano, Specialty Chemicals and CDMO space. Further, its investment in Dhaksha, a drone start-up, is progressing well and provides optionality. Analysts of IIFL Capital Services fine-tuned FY25-26 revenue estimates up by 4%, on the back of new NBS rates while the earnings remain unchanged. Maintain ADD.

Focus on vertical integration: Coromandel keeps the emphasis on complete vertical integration before evaluating capex on new capacities in fertilisers. It has recently commissioned 1,650 tpd sulphuric acid plant and has ramped up the capacity from 0.6mn to 1.1mn TPA. It further approved capex of Rs10.3bn to expand its backward integration capabilities and will be setting up a phosphoric acid (750 tpd) and a sulphuric acid (1,800 tpd) plant at Kakinada.

Traction seen in Specialty Chemicals/CDMO: Engagements on the CDMO opportunities are progressing well, with a couple of customers already sharing tech packs with the company. It has also initiated marketing of specialty chemicals products from its current manufacturing facilities. Further, the business is strengthening research and technology efforts to develop focused chemistries that cut across both crop protection chemicals and specialty chemicals.

Order book at Dhaksha rising rapidly: The Company’s subsidiary, Dhaksha Unmanned Systems, a drone manufacturer has started doing well. It now has an outstanding order book of Rs3.0bn from its customers in defence, agriculture and enterprise. It boasts of being the only Indian company that offers petrol-engine-based agriculture drones. Drones are expected to be game-changers in accelerating the adoption of water-soluble fertilisers, liquid fertilisers, nano-fertilisers and pesticides.