Alpha | Coromandel International Ltd . – Equity Research Desk

Coromandel International Ltd – Agility in Action

Coromandel International Ltd, a part of Murugappa group, is a leading provider of agricultural solutions, offering diverse products and services across the farming value chain. Established in 1961 and headquartered in Chennai, the company specializes in fertilizers, crop protein, biopesticides, specialty nutrients, organic fertilizers, etc. It is the world’s largest manufacturer of neem-based biopesticides and the largest private sector phosphatic fertilizer company in India. The company operates 18 manufacturing facilities and has a strong rural presence through nearly 900 retail outlets across Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Maharashtra.

Products and Services

The company offers a comprehensive range of products and services across key agricultural segments, including nutrient solutions such as fertilizers, single super phosphate, specialty nutrients, organic products, and nano-based innovations. Its crop protection business covers a wide portfolio of conventional crop protection chemicals and bioproducts. The company is also actively advancing in agri-tech with the deployment of drones and other technology-driven solutions. Additionally, Coromandel operates a strong retail network, providing farmers with access to agri-inputs, advisory services, and spraying solutions through its retail outlets.

Subsidiary: As of FY25, the company operates through 17 subsidiaries, along with one joint venture and one associate company.

Investment Rationale

• Strategic acquisitions – The company has undertaken several strategic acquisitions to strengthen its core businesses and diversify into adjacent sectors. In FY25, the company acquired a 53% controlling stake in NACL Industries Ltd, enhancing its footprint in the domestic crop protection segment with access to branded formulations, contract manufacturing, R&D capabilities, and a broader product portfolio. It also increased its stake in Baobab Mining and Chemicals Corporation (BMCC) in Senegal to 71.51%, securing long-term access to rock phosphate – a key raw material for phosphatic fertilizer production. Further, Coromandel formed a joint venture with Sakarni Plaster (India) Pvt Ltd. to manufacture gypsum-based building materials, converting industrial byproducts into high-value construction products for domestic and export markets. Additionally, a sourcing agreement with Ma’aden (Saudi Arabia) for DAP and ammonia ensures a steady supply chain for its Kakinada operations, supporting future growth and backward integration efforts.

• Integrated Growth Strategy -The company is systematically building an integrated and self-reliant fertiliser value chain that spans from raw material procurement to finished product delivery, reflecting a deliberate and forward-looking strategy by the management. The company is advancing backward integration projects with new phosphoric acid (650 TPD) and sulfuric acid (2,000 TPD) units at Kakinada, expected to be commissioned by Q4FY26. The newly commissioned 1,650 TPD sulfuric acid plant at Vizag is already operating at full capacity. In parallel, the company is building India’s largest phosphatic fertiliser complex at Kakinada, which includes a new granulation train with a capacity of 7.5 lakh tons and a high efficiency bagging plant, further enhancing downstream capabilities. Coromandel is setting up a multi-product plant in Gujarat to manufacture advanced technical grade agrochemicals, aligning with India’s growing role in the global supply chain. On the retail and product side, the company launched 19 new products in FY25, expanded into 40 new domestic territories, opened 73 new retail outlets, and made notable progress in Nano DAP and bio-based product lines, supporting its goal to grow across both B2C and international markets.

• Q1FY26 – During the quarter, the company reported a revenue of Rs.7,042 crore versus corresponding Rs.4,729 crore of Q1FY25, an increase of 49%. This growth was primarily driven by higher subsidy rates and volume growth across all business segments. EBITDA for the period was Rs.782 crore marking an increase of 55% YoY compared to Rs.506 crore of Q1FY25. Net profit increased by 62% from Rs.309 crore to Rs.502 crore.

• FY25 – The company generated revenue of Rs.24,085 crore, an increase of 9% during the year compared to FY24 revenue. Operating profit is at Rs.2,628 crore, up by 10% YoY. The company reported a net profit of Rs.2,055 crore, an increase of 25% YoY.  Phosphatic fertiliser sales hit an all-time high of 4 million tons during the period. 
• Financial Performance – The company has generated revenue and net profit CAGR of 8% and 4% over the period of 3 years (FY23-25). TTM sales and net profit growth is at 25% and 36% respectively. Average 3-year ROE & ROCE is around 21% and 29% during the FY23-25 period. The company has a robust balance sheet without any debt in its capital structure.

Industry

Agriculture is a vital pillar of India’s economy, providing livelihoods to nearly 55% of the population and contributing significantly to global food production. With the world’s second-largest agricultural land area, India has seen 40% growth in agri-output over the past decade, achieving surplus capacity for exports. In FY25, the sector grew by 5.4% YoY, with agricultural exports reaching a record Rs.4,40,000 crore (US$ 51.86 billion). The sector is also undergoing rapid modernization with the adoption of technologies like drones, AI, GIS, and blockchain to improve productivity and transparency. India is the fourth-largest producer and the second-largest exporter of agrochemicals globally, with the industry playing a key role in improving crop yields and food security. Rising demand for sustainable farming practices and pest-resistant crops is fuelling innovation and growth in the agrochemical segment. Supported by favourable government policies and export opportunities, both agriculture and agrochemicals offer strong long-term growth and investment potential.

Growth Drivers

• In the Union Budget 2024-25, a provision of Rs. 1.52 lakh crore (US$ 18.26 billion) has been made for agriculture and allied sector and Rs.1.62 lakh crore (US$ 18.7 billion) to the Ministry of Chemicals and Fertilizers.
• Government initiatives such as PM Kisan and Rythu Bharosa, Annadata Sukhibhava, Dhan-Dhaanya Krishi Yojana.
• 100% FDI is allowed under the automatic route in the chemicals sector with a few exceptions that include hazardous chemicals.

Peer Analysis

Competitors: Fertilizers & Chemicals Travancore Ltd (FACT), Rashtriya Chemicals & Fertilizers Ltd (RCF) etc.

Among the above competitors, with a reasonably steady revenue growth, Coromandel has better return ratios and robust earnings potential, indicating the company’s financial stability and its efficiency to generate income and returns from the invested capital.

Outlook

Looking ahead, the company is expected to maintain its EBITDA per metric ton at Rs.5,000 for FY26, in line with its normative range, reflecting stable operating performance. As part of its retail expansion strategy, Coromandel plans to double its rural retail footprint by opening 400 new outlets across five states over the next few years, strengthening last-mile connectivity and farmer engagement. The company has committed a capex of Rs.2,000 crore towards strategic projects aimed at deepening integration across the value chain. The company’s ongoing and planned investments across all key stages – indicate a clear intent to de-risk operations, secure long-term inputs, and reduce dependence on imports. 

Valuations

We believe Coromandel’s end-to-end integration strategy is a strong indicator of management’s commitment to operational resilience, margin enhancement, and value creation over the long term. We recommend a BUY rating in the stock with the target price (TP) of Rs.2,531, 23x FY27E EPS. We also encourage maintaining a stop-loss at 20% from the entry price to manage potential downside risk effectively.

SWOT Analysis

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