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United Phosphorus
Strong volume growth, conservative FY12 guidance
Strong volume growth and lower tax outgo resulted in better‐than‐expected
Q4FY11 result: United Phosphorus’ (UPL’s) net sales grew by 22.6% YoY to
Rs18.6bn (our expectation was Rs16.2bn), mainly on account of strong volume
growth of 20% YoY. Further, it was supported by 4% and 1% by price and
exchange effect, respectively during the quarter. After showing negative pricing
growth for the last seven consecutive quarters, UPL has witnessed positive (4%)
pricing growth during Q4FY11. It was mainly due to passing the higher raw
material cost to the customers. All the geographies, except Europe, have shown
strong performance on YoY basis during Q4FY11. Company has acquired Rice CO
LLC and Dupont Mancozeb business during FY11 that has contributed ~11% to
overall sales growth. UPL’s EBITDA margins have increased by 20bps YoY to
19.8%. Adjusted PAT grew by 8.4% YoY to Rs2.3bn (our expectation Rs2bn).
Better‐than‐expected PAT was mainly on account of lower tax rate of 2.2% (v/s
18% expected) and exchange gain of Rs340m (included in finance cost).
Conference call highlights: Management has guided for 12‐14% sales growth
during FY12, with the EBITDA margin of 21%. Management has indicated that
sales growth is primarily driven by volume growth. Further, overall volume
growth would be driven by the present business and acquisitions, equally.
Considering the contribution from new acquisitions (happened during FY11) and
the present volume growth momentum (15‐20%), we believe that the
management has guided conservatively on sales growth during FY12. Company
indicated tax rate of 15‐17% (v/s 10.8% in FY11) during FY12. As on March 31,
2011, company has gross debt and cash of Rs25bn and Rs6bn. Managing higher
raw material prices will be a key challenge for company, going forward.
Maintain ‘BUY’: UPL is trading at a discount (~9x) P/E as compared to its global
peers (12x‐20x) on the basis of FY12E EPS, despite higher earnings CAGR and
better RoE as compared to global peers. We are positive on the stock on
account of a diversified agriculture‐based business model, its growth potential
and discounted valuation. At present, stock is trading at ~9x at its consolidated
FY11E EPS as against its historical forward trading band of 6x‐20x. We maintain
our ‘BUY’ rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Phosphorus
Strong volume growth, conservative FY12 guidance
Strong volume growth and lower tax outgo resulted in better‐than‐expected
Q4FY11 result: United Phosphorus’ (UPL’s) net sales grew by 22.6% YoY to
Rs18.6bn (our expectation was Rs16.2bn), mainly on account of strong volume
growth of 20% YoY. Further, it was supported by 4% and 1% by price and
exchange effect, respectively during the quarter. After showing negative pricing
growth for the last seven consecutive quarters, UPL has witnessed positive (4%)
pricing growth during Q4FY11. It was mainly due to passing the higher raw
material cost to the customers. All the geographies, except Europe, have shown
strong performance on YoY basis during Q4FY11. Company has acquired Rice CO
LLC and Dupont Mancozeb business during FY11 that has contributed ~11% to
overall sales growth. UPL’s EBITDA margins have increased by 20bps YoY to
19.8%. Adjusted PAT grew by 8.4% YoY to Rs2.3bn (our expectation Rs2bn).
Better‐than‐expected PAT was mainly on account of lower tax rate of 2.2% (v/s
18% expected) and exchange gain of Rs340m (included in finance cost).
Conference call highlights: Management has guided for 12‐14% sales growth
during FY12, with the EBITDA margin of 21%. Management has indicated that
sales growth is primarily driven by volume growth. Further, overall volume
growth would be driven by the present business and acquisitions, equally.
Considering the contribution from new acquisitions (happened during FY11) and
the present volume growth momentum (15‐20%), we believe that the
management has guided conservatively on sales growth during FY12. Company
indicated tax rate of 15‐17% (v/s 10.8% in FY11) during FY12. As on March 31,
2011, company has gross debt and cash of Rs25bn and Rs6bn. Managing higher
raw material prices will be a key challenge for company, going forward.
Maintain ‘BUY’: UPL is trading at a discount (~9x) P/E as compared to its global
peers (12x‐20x) on the basis of FY12E EPS, despite higher earnings CAGR and
better RoE as compared to global peers. We are positive on the stock on
account of a diversified agriculture‐based business model, its growth potential
and discounted valuation. At present, stock is trading at ~9x at its consolidated
FY11E EPS as against its historical forward trading band of 6x‐20x. We maintain
our ‘BUY’ rating on the stock.
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