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Await more growth initiatives

* We reinstate our overall volume assumptions for FY22/23/24 to 8%/4%/4% after the increase in subsidy for complex fertilizers by the government. We are raising our WC assumption to 80 days (56 days in FY20) to factor in the elevated receivables cycle due to higher share of subsidies.

* We maintain our Hold rating and target P/E multiple of 15x while revising the TP. We roll forward to Sep-23E EPS (Mar-23E earlier) and arrive at our Sep-22E TP of Rs855 (Rs790 earlier). The 8% TP increase is driven by EPS upgrade (2%) and roll-forward to Sep-23E (6%).

* The crop protection (CP) segment appears stable and on track to deliver 15% revenue CAGR over FY21-23E, driven by new product launches in the domestic market, ramp-up of capacities in the Bio-pesticides segment and backward integration in export molecules.

* However, with no major capacity expansion in the fertilizer segment, we expect a modest EPS CAGR of 9% over FY21-24E which, in our view, limits further re-rating potential. We await more initiatives on fertilizer segment growth or an opportunity to enter the name at a lower level. Maintain Hold and UW stance in our EAP.

Fertilizer segment dragging overall growth

We expect fertilizer segment EBITDA to see a modest 4% CAGR over FY21-24E as CRIN is already operating at >90% capacity. Debottlenecking should increase capacity by 6-8% in FY21-23E. Hence, we await organic/inorganic growth initiatives in the fertilizer segment. With tougher environmental approvals for Greenfield fertilizer plants, we believe that inorganic opportunities might be a more feasible way for delivering growth.

7% EBITDA CAGR over FY21-24E; stock to remain sideways

We raise our FY22/23/24 EBITDA estimates by 4%/3%/2% as we reinstate our volume assumptions after the government increasing subsidy for complex fertilizers. We also raise our manufacturing EBITDA/ton by 3-5% for FY22-24E on higher subsidies. However, we maintain our Hold rating due to a modest 7% EBITDA CAGR over FY21-24E. Our EPS CAGR is higher at 9% due to higher other income on account of cash accumulation. We expect CRIN to accumulate cash to fund inorganic growth.

Key risks are: 1) sharp movement in raw material prices; 2) adverse weather conditions; 3) unfavorable forex movement; and 4) delay in capex execution.

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