Ministry of Chemical and Fertilisers, DOF announced the Nutrient based subsidy for complex fertilisers for FY12. Subsidies are revised upward on the back of higher international prices for raw materials/ fertilisers. Govt has emphasised that the fertiliser prices at farmgate should remain at current levels and there should be no significant increase in FY12.

Upward revision in subsidy for FY12: Subsidies for primary nutrients N, P & K and secondary nutrient S has been revised.

Outlook for Coromandel International: With efficient raw material sourcing ability, ongoing capacity expansion and rising proportion of non-subsidy business (micronutrients/ specialty fertilisers/ composites) CIL is better positioned to capture the structural growth in Indian fertiliser space.

VALUATIONS AND RECOMMENDATION
We have revised our earning estimates upward for FY12 by 40.8% following government’s revision in subsidy for complex fertiliser. At the CMP of Rs287, CIL trades at FY11 and FY12 P/E of 14.2x and 10.1x and EV/EBITDA of 4.8x and 3.8x respectively. We upgrade our recommendation to ‘BUY’ with a target price of Rs342 (12x FY12E EPS) for 1 year time horizon.