NACL Industries open offer: Coromandel International shares a buy? Here's target price

Shares of Coromandel International Ltd and NACL Industries Ltd are in news after the former took an inorganic route to speed-up its growth by signing a definitive agreement to acquire 53 per cent stake in NACL Industries from the current promoter at Rs 76.70 per share. Coromandel International will pay Rs 820 crore in cash for the 53 per cent stake, which values NACL at Rs 1,550 crore. Coromandel International has proposed to make an open offer to the public to acquire up to 26 per cent of the equity share capital of NACL Industries. 

At peak Ebitda and PAT of Rs 190 crore and Rs 95 crore in FY23, the transaction values NACL at EV/Ebitda and PE of 11 times and 16 times. This is against peer EV/Ebitda average of 7-10 times and PE of 15-20 times, Antique Stock Broking  said.

"Currently, Coromandel International has crop protection sales/ EBIT of Rs 2500 crore/ Rs 290 crore during FY24. Further, NACL's strong presence in the export as well as domestic markets will help Coromandel enhance its market reach and expand its product portfolio. We have not consolidated NACL's financials into our estimates," Antique Stock Broking said. 

The brokerage said Coromandel International is on a strong growth trajectory, led by the setting up of an additional 1 mmtpa capacity, improvement in backward integration, scale-up of the CP business and foray into specialty chemicals and CDMO. It said the acquisition of NACL will improve business mix. 

These benefits are seen starting flowing in from FY26 onwards. The brokerage said the recent correction in the stock price should be used as a buying opportunity. 

Antique Stock Broking expects Coromandel International's revenue to grow at 9 per cent, Ebitda at 16 per cent and PAT at 19 per cent, compounded annually over FY24-27E.  "We maintain Coromandel International's FY26/ 27 EPS estimates and Buy rating with a target price of Rs 2,280 valuing the stock at 25 times FY27E EPS," Antique Stock Broking said.

The transaction is expected to close in 1HFY26.