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Crop protection excels; fertilizer margins under pressure Operating performance misses estimates

* Coromandel International (CRIN) delivered a muted operating performance in 1QFY27 (EBITDA down 3% YoY), as the Middle East conflict-driven raw material inflation outpaced subsidy support. However, crop protection continued to show strong traction, with standalone EBIT up 44% YoY and margin expansion of 300 bps.

* Going ahead, crop protection growth is expected to be driven by a strong B2B export pipeline, improving realizations in key molecules and continued new product launches. New products contributed 32% of domestic B2C sales vs. 20% last year. The company is also expanding its crop protection portfolio through capacity additions, flow chemistry capabilities and CDMO opportunities.

* Factoring in continued cost pressure, we cut our FY27 earnings estimate by 10% while largely maintaining FY28 estimates. We value the company at ~25x FY28E EPS to arrive at a TP of INR2,530. Reiterate BUY.

Healthy revenue growth offset by margin pressure

* CRIN reported overall revenue of INR81.6b (est. in line) in 1QFY27, up ~16% YoY. Nutrient & other allied business revenue grew 9% YoY to INR69.5b, with crop protection business revenue growing 73% YoY to ~INR12.5b.

* Total manufacturing fertilizer volumes (NPK + DAP) remained flat YoY at 889kmt, and total phosphate fertilizer manufacturing volumes (including SSP) grew 3% YoY to 0.7mmt. Overall phosphatic volumes (NPK + DAP) grew by 6% to 1.1mmt. Standalone crop protection (i.e., ex-NACL) business grew 20% to INR8.7b. According to our calculations, manufacturing EBITDA/mt (including SSP) declined 14% YoY to INR4,414, while EBITDA/mt for phosphate fertilizers (DAP and NPK) stood at INR5,212 (down 11% YoY).

* EBITDA margin contracted 190bp YoY to 9.3% (est. 10.1%). As a % of sales, RM costs stood at 75.7% in 1QFY27 vs. 74.4% in 1QFY26; employee cost at 3.7% vs. 3.2%; freight costs at 5.3% vs. 5.4%; and other expenses at 6.1% vs. 5.9%. EBITDA declined 3% YoY to ~INR7.6b (est. INR8.4b).

* EBIT margin for Nutrient and other allied businesses contracted 300bp YoY to 6.9%, with crop protection margins contracting ~170bp YoY to 13.6% (standalone CP margins expanded 300bp).

* Adj. PAT stood at ~INR3.8b (est. INR5b), down 25% YoY.

Valuation and view

* We expect the company to face near-term challenges in the fertilizers segment due to elevated working capital amid a volatile raw material environment. However, CRIN’s medium-term outlook remains strong, backed by

1) expansion into new geographies

2) development of new molecules across fertilizer and crop protection segments

3) backward integration for the fertilizer business (a 2kTPD sulfuric acid plant and 650 TPD phosphoric acid plant)

4) acquisition of NACL

5) the scale-up of Baobab Mining and Chemicals Corp. (Senegal).

* We expect the company to clock a CAGR of 10%/18%/21% in revenue/EBITDA/ adj. PAT over FY26-28. Factoring in continued cost pressure, we cut our FY27 earnings estimate by 10% while largely maintaining FY28 estimates. We value CRIN at ~25x FY28E EPS to arrive at a TP of INR2,530. Reiterate BUY.

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