COROMANDEL - Coromandel International Limited Share Price

During the Q2 FY '26 earnings call, management from Coromandel International Limited provided a favorable outlook, highlighting several key points:

1. Operational Performance: The company reported a consolidated total income of INR 9,771 crores for Q2, marking a 30% growth year-on-year, and INR 16,897 crores for the first half, a 38% increase. The EBITDA for the quarter reached INR 1,147 crores, up from INR 975 crores last year, reflecting efficiency in production and strong demand for Agri inputs.

2. Market Trends: Management noted a significant shift toward NPK fertilizers, which now represent 64% of overall phosphatic consumption, indicating a trend towards balanced nutrition. This transition is supported by government policy changes and increased subsidies, including an announced 4% to 10% increase in Minimum Support Prices (MSP) for Rabi crops.

3. Supply Chain Developments: The company is seeing enhanced production capabilities, with fertilizer plants operating at over 100% capacity, and NPK production increased by 3% YoY to 9.1 lakh tons during the quarter. The phosphoric acid facility also grew production by 13% to 5.1 lakh tons total as of now.

4. Future Projects: Significant advancements are being made with the backward integration project for sulfuric and phosphoric acid nearing completion; 90% of project goals have been achieved, with commissioning expected in January 2026.

5. Strategic Initiatives: Management detailed plans to ramp up their NPK capacity by an additional 1 million tons by Q3 FY '27 and highlighted securing long-term contracts for raw materials from international partners. Additionally, the retail segment is on track to open 2,000 stores by FY '26, with substantial growth in the specialty nutrients and crop protection sectors.

6. Financial Stability: The company's net profit after tax for Q2 was INR 793 crores, compared to INR 659 crores previously. The subsidy outstanding has increased to INR 3,199 crores, though collection efforts show promise with a significant amount processed in October.

Overall, management conveyed a strong position for growth in the upcoming Rabi season and expressed confidence in navigating raw material price fluctuations while focusing on enhancing operational efficiencies and market share.

Here are the major questions and answers from the Q&A section of the earnings transcript:

1. Question: "What are the key drivers for the manufactured EBITDA per ton in the fertilizer segment in the current quarter, especially compared to Q1 or the previous year?"

   Answer: I wouldn't track EBITDA margin on a quarterly basis. Q2 is our peak quarter, benefiting from good phosphatic production and operational efficiency, maintaining plants above 100% capacity. Our target is a minimum of INR 5,500 EBITDA per metric ton, which we are confident of achieving in the second half.

2. Question: "With NPK gaining market share over DAP, how sticky do you think this trend will be if DAP availability improves?"

   Answer: Farmers are increasingly recognizing the benefits of balanced NPK nutrition. Even if DAP prices align, I believe the shift toward NPK will be durable as it fosters long-term balanced nutrition, aided by our ongoing extension efforts.

3. Question: "What utilization rates of Phos acid and Sulfuric acid can we expect in FY '27?"

   Answer: We aim for 100% utilization in the first month post-commissioning of the plants next year. We plan for 300,000 tons of rock from Senegal this year, with aspirations to elevate it to 500,000 tons next year through further investments.

4. Question: "Post-NBS policy, do you anticipate price hikes in NPK?"

   Answer: NBS provides pricing freedom for NPKs, and we will take necessary pricing actions based on market needs and input costs while ensuring fertilizer availability for farmers.

5. Question: "What are the latest developments in Dhaksha, and when should we expect fresh orders?"

   Answer: Dhaksha is focused on new product development and executing defense orders. These orders require extensive evaluation time. We're also enhancing drone capabilities used in agricultural services, though revenue from this may take time to reflect significantly.

6. Question: "Why have other expenses increased significantly in recent quarters?"

   Answer: This change results primarily from CSR expenditure shifts and one-off consulting-related expenses associated with the NACL acquisition, which will normalize moving forward.

7. Question: "When will trial runs for the new Phos acid plant begin?"

   Answer: We project mechanical completion in December, with trial runs starting in January and full production commencing in the second or third week of January.

8. Question: "Could you elaborate on the export performance of the crop protection segment?"

   Answer: The export business saw about a 6-7% growth this quarter, primarily driven by Mancozeb, which has substantially improved profitability, raising margins from 15% to 20%.

9. Question: "How do you plan to grow NACL's existing portfolio while managing margin expectations?"

   Answer: We're pursuing synergies in markets and R&D with NACL while not rationalizing products but aiming to enhance both businesses. We expect NACL's margin to align closer to ours through new products and improved operations.

10. Question: "What is the crop protection revenue growth outlook and what strategies are in place post-integrating NACL?"

    Answer: Domestic formulation business is solid, with a projected 25% growth this year. We aim to leverage both Coromandel's and NACL's networks to expand territories and share innovative products, targeting overall top-line growth of 20-25%.