A 45% upside! Here's why Motilal Oswal is bullish on this mid-cap stock

The first day of the week saw a disastrous start as the 30-share index plummeted over 1,600 points on Monday as concerns over rising Omicron cases spooked investors.
 
However, experts believe that this is a good opportunity to buy the dips. Amid the market mayhem, shares of the country’s second-largest phosphatic fertilizer player, Coromandel International Limited (CRIN) tanked 2 per cent to hit a 52-week low of Rs 709.55 on the Bombay Stock Exchange (BSE).
 
Brokerage house Motilal Oswal has maintained a 'Buy' rating on the stock with a target price of Rs 1,035 (upside of 45 per cent). It believes that the structural story remains intact with regard to increasing awareness among farmers about having balanced nutrients in crops. This is likely to aid the shift to complex fertilizers from urea, of which CRIN would be a key beneficiary.
 
The stock ended 1.81 per cent lower at Rs 714.50 against the previous close of Rs 727.70. With a market capitalisation of Rs 20,970 crore, the shares trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
 
It noted that the company has announced the setting up of a new 1,650 MT/day design capacity sulfuric acid plant at its fertilizer complex in Visakhapatnam for Rs 400 crore. This would result in annual cost savings of Rs 50-60 crore. The plant will be operational by 2QFY24.
 
The brokerage firm mentioned that the key levers that would drive growth going forward include CRIN’s focus on increasing penetration in existing markets, debottlenecking to increase capacity, efforts to lower the cost of raw material, while maintaining the same level of quality, and establishing an alternative sourcing destination (which would aid cost savings), the launch of 3-4 molecules in the crop protection segment, inorganic growth, and focus on profitable growth in the retail business by reorganizing stores depending on consumption patterns.
 
"Despite an increase in government subsidy, we expect CRIN’s EBITDA margin to remain under pressure as the industry has not taken adequate price hikes due to government restrictions to adequately cover the increase in commodity cost," Motilal Oswal said in its research report.
 
Recently, the company announced the project initiation for setting up a new 1650 metric tonnes per day design capacity sulphuric acid plant at its fertiliser complex in Visakhapatnam for INR 400-cr. The announcement was made by Mr. Arun Alagappan, Executive Vice Chairman, Coromandel
International Limited. The company has also signed technology partnership agreements with MECS (Monsanto Enviro-Chem Systems) and TKIS (ThyssenKrupp Industrial Solutions).
 
Coromandel International stated that the new sulphuric acid plant for which the investment has been announced will increase the sulphuric acid production capacity by a further 5 Lakh metric tonnes per annum from the current level of 6 Lakh Metric Tonnes per annum, thereby resulting in a combined capacity of 11 lakh metric tonnes.
 
The company operates in two major segments: Nutrient and other allied businesses and, crop protection. These include fertiliser, crop protection, biopesticides, specialty nutrients and organic compost businesses.