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United Phosphorus (UPL) reported marginally disappointing set of numbers for
2QFY2011. Total sales grew 8.6% yoy to `1,257cr, while EBITDA margin came in
at 19%. PAT came in at `131cr (`101cr), up 13.4% yoy as against our estimate of
`134cr. We maintain an Accumulate on the stock.
Revenue growth continues to be a concern: UPL registered mere 8.6% yoy growth
in total revenues for the quarter to `1,257cr as against our estimate of `1,388cr.
Revenue growth was impacted by 3% on account of the unfavourable exchange
variance. However, volumes continued to be strong moving up 10% in
2QFY2011.
Outlook and Valuation: Over FY2010-12, we expect UPL to post 8.7% and
21.6% CAGR in sales and PAT, respectively. Going ahead, UPL's profitability is set
to perk up with EBITDA margins improving on the back of stable raw material
prices, pick up in demand and restructuring of Cerexagri. We expect RoCE and
RoE to improve from 14.1% and 19.4% in FY2010 to 20.2% and 19.8% in
FY2012, respectively. At current valuations, the stock is trading at 11.4x FY2012E
EPS. We maintain an Accumulate on the stock, with a Target Price of `228.
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