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UBS Investment Research
United Phosphorus Limited
S trong sales growth; exceptional in Q2
Event: Robust sales growth; Q2FY12 results miss on exceptionals
United Phosphorus (UPL) adjusted Q2FY12 PAT at Rs1.8bn was up 39% YoY,
higher than UBS/ street estimates. Reported PAT at Rs569mn limited by forex loss
of Rs1.1bn due to foreign liabilities re-pricing and Rs144mn of transaction costs.
Sales growth at 40.5% YoY (Volumes up 25% YoY) was due to strong India, rest
of World and North America growth and RiceCo, DVA acquisition impact.
Impact: Higher revenue growth, lower margins; maintain PAT estimates
Management upgraded revenue growth guidance again to 30%+ (they had
increased it from 12-15% to 25-30% last quarter) given strong demand. They have
marginally lowered EBITDA margin outlook from 20% to 19%, given raw
material and new acquisitions. We broadly maintain our earnings estimates.
Action: Maintain Buy on attractive valuations, strong growth in FY12E
Strong H1FY12 indicates recovery in growth, after earlier muted quarters. UPL
stock looks attractive at 8.2FY12E P/E, given forecast 27% FY11-13 CAGR
earnings growth. Concerns on long-term growth from inorganic opportunities (as
has been historically) still remain given much larger base and aggressive intent of
Chinese companies. However, recent acquisitions are reassuring. Near-term
outlook for industry looks positive and UPL remains well placed to benefit.
Improved growth outlook should aid stock to rerate over next couple of quarters.
Valuation: Buy with a PT of Rs210/share
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
United Phosphorus Limited
S trong sales growth; exceptional in Q2
Event: Robust sales growth; Q2FY12 results miss on exceptionals
United Phosphorus (UPL) adjusted Q2FY12 PAT at Rs1.8bn was up 39% YoY,
higher than UBS/ street estimates. Reported PAT at Rs569mn limited by forex loss
of Rs1.1bn due to foreign liabilities re-pricing and Rs144mn of transaction costs.
Sales growth at 40.5% YoY (Volumes up 25% YoY) was due to strong India, rest
of World and North America growth and RiceCo, DVA acquisition impact.
Impact: Higher revenue growth, lower margins; maintain PAT estimates
Management upgraded revenue growth guidance again to 30%+ (they had
increased it from 12-15% to 25-30% last quarter) given strong demand. They have
marginally lowered EBITDA margin outlook from 20% to 19%, given raw
material and new acquisitions. We broadly maintain our earnings estimates.
Action: Maintain Buy on attractive valuations, strong growth in FY12E
Strong H1FY12 indicates recovery in growth, after earlier muted quarters. UPL
stock looks attractive at 8.2FY12E P/E, given forecast 27% FY11-13 CAGR
earnings growth. Concerns on long-term growth from inorganic opportunities (as
has been historically) still remain given much larger base and aggressive intent of
Chinese companies. However, recent acquisitions are reassuring. Near-term
outlook for industry looks positive and UPL remains well placed to benefit.
Improved growth outlook should aid stock to rerate over next couple of quarters.
Valuation: Buy with a PT of Rs210/share
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool.
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