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United Phosphorus (UNTP)
Others
PAT miss due to drop in margin. Strong sales growth at 27% beat our estimate of
17% driven by strong volume and organic growth. However, EBITDA margin dropped
100 bps yoy due to a 300 bps decline in gross margin reflecting increased cost base. On
account of the strong organic growth and high-growth Brazilian acquisition, we revise
our sales growth estimate to 25% (from 13%). However, we revise our FY2012E
estimate downwards by 9% due to lower margin assumption at 19%, flat yoy, and
largely maintain FY2013E estimate. Maintain BUY with PT at Rs220 (unchanged).
Strong sales growth at 27% based on healthy volume and organic growth
Sales growth at 27% beat our estimate of 17%, led by (1) 25% volume growth reflecting the
strong underlying demand industry is witnessing, (2) pricing increase of 1% which dropped from
3% last quarter, (3) organic growth of 17%, up from 13% in 4QFY11 and (4) inorganic growth of
10%, same as seen in 4QFY11. Sales growth was led by all geographies: (1) India reported very
strong growth at 32% in a seasonally weak quarter, (2) ROW at 35%, (3) NA at 32%, however (4)
Europe continues to be a drag and reported sales growth of 6% after 7 quarters of sales decline
largely based on volume with pricing decline, in a seasonally strong quarter.
Despite higher sales, EBITDA margin drops on account of raw material pressure
Despite higher sales versus estimate, EBITDA margin (excluding other income) drops 100 bps yoy
to 18.5% due to (1) severe raw material pressure which led to gross margin dropping 300 bps yoy
to 35%, (2) higher expenses on account of the concluded acquisitions. Higher-than-expected
interest cost, tax rate and depreciation led to PAT at Rs1.84 bn, 22% lower than our estimate.
We believe 25% sales growth is achievable
UPL revised its FY2012E sales growth guidance to 25-30% from 12-14% due to the addition of
sales from acquisition of DVA Agro in Brazil. We estimate sales growth of 25% in FY2012E and
believe this is achievable as (see Exhibit 3) (1) sales CAGR of recently acquired company in Brazil is
28-30%, we assume 20% sales growth for DVA with sales at US$150 mn in FY2012E and (2)
guidance implies 6% organic growth in 9MFY12E, which is certainly achievable given the 17%
reported in 1QFY12.
We revise our FY2012E EPS downwards by 9%, FY2013E down by 2%
Despite higher sales growth in FY2012E, we revise our PAT estimate downwards due to (1) lower
EBITDA margin assumption at 19%, flat yoy, (2) increase in interest cost due to increase in debt of
Rs5 bn as of June 2011 and (2) higher tax rate at 20% versus 17% earlier. We believe any pricing
increase taken to counteract cost pressure may lead to an upside to our estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Phosphorus (UNTP)
Others
PAT miss due to drop in margin. Strong sales growth at 27% beat our estimate of
17% driven by strong volume and organic growth. However, EBITDA margin dropped
100 bps yoy due to a 300 bps decline in gross margin reflecting increased cost base. On
account of the strong organic growth and high-growth Brazilian acquisition, we revise
our sales growth estimate to 25% (from 13%). However, we revise our FY2012E
estimate downwards by 9% due to lower margin assumption at 19%, flat yoy, and
largely maintain FY2013E estimate. Maintain BUY with PT at Rs220 (unchanged).
Strong sales growth at 27% based on healthy volume and organic growth
Sales growth at 27% beat our estimate of 17%, led by (1) 25% volume growth reflecting the
strong underlying demand industry is witnessing, (2) pricing increase of 1% which dropped from
3% last quarter, (3) organic growth of 17%, up from 13% in 4QFY11 and (4) inorganic growth of
10%, same as seen in 4QFY11. Sales growth was led by all geographies: (1) India reported very
strong growth at 32% in a seasonally weak quarter, (2) ROW at 35%, (3) NA at 32%, however (4)
Europe continues to be a drag and reported sales growth of 6% after 7 quarters of sales decline
largely based on volume with pricing decline, in a seasonally strong quarter.
Despite higher sales, EBITDA margin drops on account of raw material pressure
Despite higher sales versus estimate, EBITDA margin (excluding other income) drops 100 bps yoy
to 18.5% due to (1) severe raw material pressure which led to gross margin dropping 300 bps yoy
to 35%, (2) higher expenses on account of the concluded acquisitions. Higher-than-expected
interest cost, tax rate and depreciation led to PAT at Rs1.84 bn, 22% lower than our estimate.
We believe 25% sales growth is achievable
UPL revised its FY2012E sales growth guidance to 25-30% from 12-14% due to the addition of
sales from acquisition of DVA Agro in Brazil. We estimate sales growth of 25% in FY2012E and
believe this is achievable as (see Exhibit 3) (1) sales CAGR of recently acquired company in Brazil is
28-30%, we assume 20% sales growth for DVA with sales at US$150 mn in FY2012E and (2)
guidance implies 6% organic growth in 9MFY12E, which is certainly achievable given the 17%
reported in 1QFY12.
We revise our FY2012E EPS downwards by 9%, FY2013E down by 2%
Despite higher sales growth in FY2012E, we revise our PAT estimate downwards due to (1) lower
EBITDA margin assumption at 19%, flat yoy, (2) increase in interest cost due to increase in debt of
Rs5 bn as of June 2011 and (2) higher tax rate at 20% versus 17% earlier. We believe any pricing
increase taken to counteract cost pressure may lead to an upside to our estimates.
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