Coromandel International’s stock jumped 48% in 3 months: Is there more upside?

The rally accelerated on March 28 as the government increased the fertiliser subsidy to Rs 1.91 lakh crore and announced the Nutrient Based Subsidy (NBS) rates for the 2025 kharif season.

Year-to-date Stock Price Momentum of Paradeep Phosphates and Coromandel International

Source: Trading View

Why are NBS rates and monsoon important for the two stocks?

India has a varied agro-climatic zone, which drives demand for diverse fertilisers. The kharif season typically begins in June and lasts until September, during which demand for NPKS nutrients increases. NPKS stands for Nitrogen, Phosphate, Potash, and Sulphur, the key raw materials used in chemical fertilisers.

India is the world’s second-largest consumer of fertilisers and meets 90% of its NPK needs from indigenous production. However, it depends heavily on imports for raw materials (sulphur, ammonia, rock phosphate).

Production, Consumption, and Import of Fertilizers in India (FY19-FY24)

Source: Department of Fertilizers Annual Report 2023-24

Coromandel International and Paradeep Phosphates are the largest private phosphatic manufacturers in India. The margins of such fertiliser companies are sensitive to raw material prices as materials cost account for 74% of their operating expenses. Hence, the government gives fixed rupee per kg subsidy rates under the NBS scheme depending on the prices of raw materials.

As the two companies import large volumes of these raw materials, NBS forms a significant part of their profits.

Nutrient-Based Subsidy Rate for Kharif Season (April 1 to September 30)

Source: Department of Fertilizers

The phosphate rate increased by almost 42% in FY25. In light of the price rise, the government increased the NBS rate on phosphate to Rs 43.6 for the kharif season 2025 from Rs 28.72 a year ago. Over and above the NBS rate, the government has extended the one-time special package of Rs 3,500 per metric ton on diammonium phosphate (DAP) till September 30, 2025, to make DAP imports viable amid global supply disruptions.

What sets Coromandel apart from its competitors?

Part of the Murugappa Group, Coromandel is the largest fertiliser company by market cap (Rs 68,000 crore). It manufactures chemical fertilisers, specialty nutrients, and pesticides, and sells them to businesses and through rural retail stores. While Paradeep distributes its products through regional offices, stock points, dealers, and retailers, Coromandel has ventured into retail selling through My Gromor retail outlets and app.

At My Gromor, crop advisors provide personalised guidance on agricultural inputs, soil testing, crop diagnostics, and farm mechanisation services. The direct connection with end consumers helps Coromandel understand consumers’ needs and introduce new products that meet their specific needs (crop-specific and state-specific). The company even offered innovative services like drone-based spraying at the stores.

The company is looking to triple its retail outreach in the next three years. Such an aggressive push has created negative working capital in retail in the short term, but has the potential to improve sales in the medium to long term as new stores turn profitable.

Coromandel sowing seeds for the long term

On the manufacturing front, it has been making efforts to reduce costs and increase revenue by increasing manufacturing capacity and capability through backward integration, innovating specialised nutrients, and securing raw materials supply. It earns 89% of its revenue from the Nutrient and other Allied Products Segment (fertilisers and specialty nutrients) and the remaining from the Crop Protection Segment (pesticides like mancozeb and azadirachtin).

Coromandel has a 15% market share in NPK, DAP, and Single Super Phosphate (SSP) fertilisers for which it gets NBS subsidy. It received Rs 8,082 crore in subsidy as of March 31, 2025, compared to Rs 9,198 crore last year, as the 2023 Kharif season had high subsidy rates.

Financial Highlights of Coromandel International’s Nutrients Segment

Source: Coromandel International Q4FY25 Earnings Presentation

Raw materials supply: Coromandel has been securing raw materials supply to ensure it can meet demand. In September 2024, it increased its stake in Baobab Mining and Chemicals Corporation (BMCC) in Senegal from 45% to 54%. It will invest Rs 54 crore in BMCC’s expansion to secure the supply of rock phosphate. In April 2025, it extended its partnership with Saudi Arabian mining company Ma’aden for the long-term supply of DAP and NPK fertilisers.

Innovation and backward integration: Coromandel has been expanding its Specialty Nutrients portfolio through research & development (R&D). They are high-margin fertilisers outside the subsidy gambit, which makes them vulnerable to raw material price fluctuations. Hence, the company has been building backward integration capacity, a Phosphoric and Sulphuric acid plant, and a granulation train for NPK fertilisers at Kakinada. The new capacity addition could increase its fertiliser business EBITDA per metric ton by 40% in the next two years.

Acquiring growth in crop protection

Apart from the above growth efforts, Coromandel has created a merger and acquisition cell to look for inorganic growth opportunities. This year, it is set to acquire a 53% stake in agrochemical company NACL Industries (formerly Nagarjuna Agrichem) for Rs 820 crore and an additional 26% stake from minority shareholders for Rs 402 crore. The acquisition of the Rs 1,235 crore annual revenue company will boost Coromandel’s crop protection business.

Coromandel is acquiring NACL for its manufacturing capabilities, NABL (National Accreditation Board for Testing and Calibration Laboratories) accredited R&D facilities, strong brands, multinational clients, and domestic formulation. All of this can accelerate Coromandel’s entry into contract manufacturing, fast-track new product commercialisation, and expand its product portfolio. However, Coromandel will have to deal with NACL’s underutilised capabilities, negative margins due to a lower price of active ingredients, and high debt used for capital expenditure.

Coromandel has successfully turned around its past acquisitions, which makes investors hopeful about NACL’s acquisition, which is pending regulatory approval.

 Financial Highlights of Coromandel International’s Crop Protection Segment

Source: Coromandel International Q4FY25 Earnings Presentation

Other opportunities Coromandel is exploring

Coromandel is also looking at export opportunities in crop protection and Nano DAP. It is developing microbial crop protection products. It is also monetising its industrial byproduct to make green construction materials through a joint venture with Sakarni Plaster.

It is simultaneously working on forward integration into retail, backward integration into sulphuric and phosphoric acid, acquisitions, innovations, and new business opportunities in contract manufacturing and green construction materials.

Coromandel stock price seasonality

Despite the many moving pieces, Coromandel continues to be vulnerable to raw material prices and monsoon, which will keep its seasonality intact. The kharif season from April to September will continue to remain seasonally strong for the stock, where it could see a 20-50% rally as it did in the last 5 years.

 Coromandel International Stock Price Rally during Kharif Season (2021-2025)

Source: Trading View

Coromandel’s stock price rally during the kharif season accelerated as the company increased its revenue and profit at a 5-year compounded annual growth rate (CAGR) of 13% and 11%, respectively.

In FY25, the company’s consolidated revenue grew 9% and EBITDA grew 10%. Coromandel’s CEO, S Sankarasubramanian, expects domestic formulation, domestic B2B, and export markets to drive high double-digit revenue growth, and a higher share of new products to improve margins in FY26. The NACL acquisition and new manufacturing capabilities could continue to accelerate earnings growth in the next three years, something which investors could look for.

Coromandel is trading at a 37.5x price-to-earnings (P/E) ratio, above its 5-year PE median of 17.6x and Paradeep Phosphates’s 25.4x. Its higher PE ratio is justified by the expectation of rising profit margins and 40% EBITDA growth in the next 2-3 years.

Sharekhan and Motilal Oswal are bullish on Coromandel as they expect backward integration and a shift to a high-margin product mix to drive revenue and profit growth. They have a price target of Rs 2,535 and Rs 2,600, respectively, an upside of 11% and 14% from the current market price of Rs 2,285.5.

In conclusion

Coromandel stock’s seasonal rally has increased its valuations, reducing its short-term upside. However, the company has sown the seeds of growth. It is a good stock to add to your watchlist and see if its sown seeds reap higher margins in the medium term.

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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