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UBS Investment Research
United Phosphorus Limited
A cquisitions to boost sales growth
Event: Favourable sales growth; margins slightly lower
United Phosphorus (UPL) Q1FY12 PAT was Rs1.84bn (up 30.0% YoY), slightly
lower than our and street estimates due cost pressures, higher interest expenses
(higher cost and working capital) and 20% tax rate (higher India mix). However,
revenue growth was robust at 27.4% (volume growth at 25%, rest price and
exchange rate) YoY due to high India, rest of World and North America sales.
DVA acquisition of US$150mn will largely be used to de-leverage, strengthen
balance-sheet. EBITDA margin guidance maintained at 20-21%.
Impact: Increase revenue growth, higher tax-rate and margins
Management upgraded revenue growth guidance from earlier 12-15% to 25-30%
on DVA acquisition, but maintained EBITDA margin outlook at 20-21%. We now
assume higher FY12E sales growth at 23% YoY; lower margin increase and higher
tax rate due to India mix. In line with these and incorporating FY11 reported
financials, our estimates are broadly maintained.
Action: Maintain Buy, attractive valuations and strong growth in FY12E
Strong Q4FY11/Q1FY12 indicates recovery in growth, after earlier muted
quarters. Acquisitions to support sales growth. UPL stock looks attractive at 9.2
FY12E P/E, given forecast 23% FY11-14 CAGR earnings, and healthier balancesheet.
Management continues to scout for inorganic growth opportunities.
Valuation: Maintain Buy with a PT of Rs210
We derive our price target of Rs210 from a DCF-based methodology using UBS’s
VCAM tool. We reiterate Buy.
United Phosphorus Limited
United Phosphorus Limited (UPL) is the largest producer of crop protection
products in India with a range of products that include fumigants, fungicides,
insecticides, rodenticides and herbicides. The company's main business is
agrochemicals and industrial & specialty chemicals. Earlier this year, UPL made
its largest acquisition to date by acquiring Cerexagri, which has a significant
presence in the US and Europe. Post this acquisition, UPL is the 12th largest
agrochemical and 3rd largest generic agrochemical company globally. UPL has
fully owned subsidiaries in the US, UK, China, Australia, and Russia.
Statement of Risk
The chief risks facing United Phosphorus are execution risk in integration of its
various acquisitions, regulatory risk in different markets, currency risk and
weather related risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
United Phosphorus Limited
A cquisitions to boost sales growth
Event: Favourable sales growth; margins slightly lower
United Phosphorus (UPL) Q1FY12 PAT was Rs1.84bn (up 30.0% YoY), slightly
lower than our and street estimates due cost pressures, higher interest expenses
(higher cost and working capital) and 20% tax rate (higher India mix). However,
revenue growth was robust at 27.4% (volume growth at 25%, rest price and
exchange rate) YoY due to high India, rest of World and North America sales.
DVA acquisition of US$150mn will largely be used to de-leverage, strengthen
balance-sheet. EBITDA margin guidance maintained at 20-21%.
Impact: Increase revenue growth, higher tax-rate and margins
Management upgraded revenue growth guidance from earlier 12-15% to 25-30%
on DVA acquisition, but maintained EBITDA margin outlook at 20-21%. We now
assume higher FY12E sales growth at 23% YoY; lower margin increase and higher
tax rate due to India mix. In line with these and incorporating FY11 reported
financials, our estimates are broadly maintained.
Action: Maintain Buy, attractive valuations and strong growth in FY12E
Strong Q4FY11/Q1FY12 indicates recovery in growth, after earlier muted
quarters. Acquisitions to support sales growth. UPL stock looks attractive at 9.2
FY12E P/E, given forecast 23% FY11-14 CAGR earnings, and healthier balancesheet.
Management continues to scout for inorganic growth opportunities.
Valuation: Maintain Buy with a PT of Rs210
We derive our price target of Rs210 from a DCF-based methodology using UBS’s
VCAM tool. We reiterate Buy.
United Phosphorus Limited
United Phosphorus Limited (UPL) is the largest producer of crop protection
products in India with a range of products that include fumigants, fungicides,
insecticides, rodenticides and herbicides. The company's main business is
agrochemicals and industrial & specialty chemicals. Earlier this year, UPL made
its largest acquisition to date by acquiring Cerexagri, which has a significant
presence in the US and Europe. Post this acquisition, UPL is the 12th largest
agrochemical and 3rd largest generic agrochemical company globally. UPL has
fully owned subsidiaries in the US, UK, China, Australia, and Russia.
Statement of Risk
The chief risks facing United Phosphorus are execution risk in integration of its
various acquisitions, regulatory risk in different markets, currency risk and
weather related risk.
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