Coromandel International a good bet on govt's agriculture reforms | Economic Times

Coromandel International, the second-largest phosphatic fertiliser player of India, will be one of the key beneficiaries of the recent agriculture reforms by the government. The government decision to liberate farmers from local markets (or mandis) and allow them to sell to anyone or anywhere now will help farmers to get better prices for their products. This move will also result in farmers using better technologies and in turn, help companies like Coromandel which functions in speciality nutrients and crop protection.Coromandel was doing well even before this reform and therefore, this reform is expected to give an additional push in its growth. The company did well during the second quarter of 2020-21 and was able to show better net profit y-o-y. Once the Covid induced disturbances were over, Coromandel was able to operate its plants normally. Its nutrient business plants operated at 90% of utilisation levels in the second quarter as compared to 86% in the corresponding period of previous year. Coromandel’s speciality nutrients business focuses on water soluble fertiliser, sulphur & micronutrients.The company’s crop protection segment, which offers a wide range of technical and formulation products, is already doing well and has reported 25% y-o-y revenue growth in the second quarter of 2020-21. Around 26% of this revenue jump came from new products introduced in domestic and export markets. The company continues to invest heavily in research and development (R&D). In addition to its own products, Coromandel also has strategic tie-ups with global players and co-markets its products in India and other countries.The company is also taking several steps to improve its interaction with farmers. It is using its 750 rural retail outlets to offer other farming services like crop advisory, soil testing and farm insurance. The shift towards ‘organic products’ should also benefit it since it is a leading marketer of organic fertilisers in India and has recently added biopesticide solutions to its portfolio.One negative in this counter is the delay in subsidy payment by the government and its subsidy receivable jumped up by 55% in the first half of 2020-21. Since the finance of government is stretched now, this situation is expected to continue in the second half of 2020-21. Though this will result in deterioration of working capital cycles, i.e. the same will go up by 10 days; this is a short term phenomenon and will not impact its long term prospects.Analysts' viewBuy: 14Sell: 1Hold: 3 80071359Selection MethodologyWe pick up the stock that has shown the maximum increase in “consensus analyst rating” during the last 1 month. Consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (i.e. 5 for strong buy, 4 for buy, 3 for hold, 2 for sell and 1 for strong sell) and any improvement in consensus analyst rating indicates that the analysts are getting more bullish on the stock. To make sure that we pick only companies with decent analyst coverage, this search will be restricted to stocks with at least 10 analysts covering it.