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United Phosphorus (UNPO.BO)
Buy Equity Research
Below Expectations: Visibility on pricing and growth in Europe key
What surprised us
United Phosphorus (Uphos) reported adjusted PAT of Rs5.8bn below GS
estimate of Rs6.3bn and Bloomberg consensus of Rs6.02bn primarily on
account of higher interest expenses (offset by lower tax rate and higher
other income) and loss from associates. While EBITDA margin of about
19.7% for FY11 vs management guidance of 21% is in line with our
estimates, revenues growth from Europe continued to decline in the fourth
quarter. After three quarters of pricing declines, Uphos registered a
positive pricing growth of 3% and volume growth of 20% for 4QFY11.
Management guided for 1) a revenue growth of about 12%-14% (purely
volume driven and 50% of growth is through organic route); and 2)
EBITDA margin of 21% about 130bps improvement over FY11 on account
of re-structuring of the acquired entities in Latin America.
What to do with the stock
We re-iterate Buy on United phosphorus. We reduce our FY12E/13E EPS by
about 13%/18% and 12-m P/E based TP to Rs175 (from Rs 192) implying
potential upside of 15% primarily to reflect 1) EBITDA margins of about 19.7%
similar to FY11. We would wait for more visibility on re-structuring before
reflecting it in our estimates; and 2) higher interest expenses. We believe UNTP
leveraging its strong balance sheet and underlying strength in agri-commodity
prices is best positioned to pursue both organic and inorganic earnings growth.
Adverse weather conditions are the key risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Phosphorus (UNPO.BO)
Buy Equity Research
Below Expectations: Visibility on pricing and growth in Europe key
What surprised us
United Phosphorus (Uphos) reported adjusted PAT of Rs5.8bn below GS
estimate of Rs6.3bn and Bloomberg consensus of Rs6.02bn primarily on
account of higher interest expenses (offset by lower tax rate and higher
other income) and loss from associates. While EBITDA margin of about
19.7% for FY11 vs management guidance of 21% is in line with our
estimates, revenues growth from Europe continued to decline in the fourth
quarter. After three quarters of pricing declines, Uphos registered a
positive pricing growth of 3% and volume growth of 20% for 4QFY11.
Management guided for 1) a revenue growth of about 12%-14% (purely
volume driven and 50% of growth is through organic route); and 2)
EBITDA margin of 21% about 130bps improvement over FY11 on account
of re-structuring of the acquired entities in Latin America.
What to do with the stock
We re-iterate Buy on United phosphorus. We reduce our FY12E/13E EPS by
about 13%/18% and 12-m P/E based TP to Rs175 (from Rs 192) implying
potential upside of 15% primarily to reflect 1) EBITDA margins of about 19.7%
similar to FY11. We would wait for more visibility on re-structuring before
reflecting it in our estimates; and 2) higher interest expenses. We believe UNTP
leveraging its strong balance sheet and underlying strength in agri-commodity
prices is best positioned to pursue both organic and inorganic earnings growth.
Adverse weather conditions are the key risk.
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