Review

In this edition, we have reviewed Coromandel International Limited and Alembic Ltd.We suggest our reader-investors to HOLD in Coromandel International Limited and Alembic Ltd

We had previously recommended Coromandel International Limited in Volume No. 35, Issue No. 22, dated September 28 - October 11, 2020, in the ‘Choice Scrip’ segment. The stock was then trading at Rs802.05 per share and was recommended based on the company’s strong valuations.

Coromandel International operates in crop protection and nutrients and other allied businesses. On the financial front, considering the company’s quarterly performance, for Q3FY21 its net sales increased by 7.76 per cent to Rs3,533.01 crore from Rs3,278.65 crore posted in Q3FY20. Operating profit expanded by 15.2 per cent to Rs508.09 crore in Q3FY21 compared to Rs441.06 crore in Q3FY20.

The company reported 25.64 per cent rise in its net profit at Rs332.23 crore for Q3FY21 compared to Rs264.44 crore reported in Q3FY20. On the annual front, its net sales decreased by 0.66 per cent to Rs13,136.69 crore in FY20 compared to Rs13,224.56 crore in FY19. Operating profit for FY20 came in at Rs1,771.02 crore, expanding by 19.65 per cent from Rs1,480.13 crore posted in FY19. Coromandel International gained a net profit of Rs1,064.26 crore in FY20, increasing by 47.89 per cent compared to the net profit of Rs719.64 crore reported for FY19.

The company is one of the market leaders amongst all the domestic fertiliser producers. Its crop protection business witnessed an increase in revenues during the Q3FY21 quarter with new product launches supporting revenue growth. Since in the coming months the rainfall is expected to be normal, it will help the company to maintain robust volume growth in its fertiliser and crop protection segments. Hence, considering the company’s strong growth potential, we recommend HOLD.

We had previously recommended Alembic Ltd. in Volume 35, Issue No. 21, dated September 14 - September 27, 2020 under the ‘Low Price’ segment. The recommended price for the stock was Rs102.25. The basis of recommendation was the attractive valuations depicted by the company’s financial as well as operational performance and the robust future expansion plans drafted by the company. Alembic Limited is engaged in the business of pharmaceuticals and real estate.

Observing the financial performance of Alembic Ltd. in the recent quarters we can see that on a consolidated quarterly basis the net sales rose up by 13.48 per cent to Rs14.48 crore in Q3FY21 as compared to Rs12.76 crore in Q3FY20.

The operating profit jumped up massively from Rs1.94 crore in Q3FY20 to Rs6.92 crore in Q3FY21. Meanwhile, the net profit shined for the quarter, which came in at Rs4.87 crore in Q3FY21 as compared to net profit of Rs0.93 crore in Q3FY20, a significant rise. This increase can be attributed to a substantial change in the other income in Q3FY21 as compared to Q3FY20.

On an annual basis the net sales were seen declining by 42.11 per cent from Rs127.71 crore in FY19 to Rs73.93 crore in FY20. On the other hand, the operating profit was seen expanding by 91.68 per cent in FY20 as compared to FY19. The net profit on an annual basis rose significantly, recording at Rs93.04 crore in FY20 as compared to Rs43.46 crore in FY19. The company has launched three amongst all the domestic fertiliser producers. Its crop protection business witnessed an increase in revenues during the Q3FY21 quarter with new product launches supporting revenue growth. Since in the coming months the rainfall is expected to be normal, it will help the company to maintain robust volume growth in its fertiliser and crop protection segments. Hence, considering the company’s strong growth potential, we recommend HOLD.brands which have found a position in the top 300 category. Going forward the company aims to focus on new launches across key markets. Also, the company’s emphasis on specialty segment along with its aim for 93 per cent new launches in specialty products is likely to drive its future growth. Hence, we recommend HOLD.

(Closing price as of Mar 05, 2021)