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United Phosphorus (UNTP)
Others
Strong quarter, forex only dampener. Forex drawbacks aside, which are likely to
reverse in 2HFY12E, results were strong with PAT ex-forex at Rs1.48 bn, beating our
Rs1.3 bn estimate due to very high sales growth at 40% versus our 22% estimate. We
raise sales growth to 30% (from 25%) and leave our FY2012-13E EPS largely
unchanged for lower margin. Maintain BUY with target price of Rs220 (unchanged).
Strong sales growth at 40% based on healthy volume and organic growth
Sales growth at 40% beat our estimate of 22%, led by (1) 31% volume growth reflecting the
strong underlying demand industry is witnessing, (2) pricing increase of 4%, up from 1% last
quarter, (3) organic growth of 25%, up from 17% in 1QFY11, and (4) inorganic growth of 15%,
10% in 1QFY12 due to consolidation of DVA Agro which registered sales of Rs2 bn in 2QFY12
and Rs400 mn from Rice Co. acquisition. Sales growth was led by—(1) India reported very strong
growth of 25% on a high base, (2) ROW sales more than doubled due to DVA consolidation
starting this quarter. However, Europe was a laggard with 3% sales growth, although it was a
seasonally weak quarter for EU and North America.
EBITDA margin down 80 bps yoy on account of raw material pressure
EBITDA margin (including other income) continued to remain under pressure, dropping 80 bps yoy
as witnessed in 1QFY12 due to lower gross margin yoy at 37% versus 40% last year on account of
raw material cost pressures although fixed overheads were down marginally qoq despite
consolidation of DVA this quarter. However, gross margin has improved qoq to 37% from 35% in
1QFY12 due to output price increases. We estimate FY2012E margin at 19.6% and estimate
2HFY12E margin at 19.7% versus 19.4% in 1HFY12 as (1) operating leverage benefit should play
out in 4QFY12E with (2) gross margin remaining steady at 36% as seen in 1HFY12.
We estimate FY2012E sales growth at 30%, lower end of guidance
UPL revised its FY2012E sales growth guidance second time in a row to 30-35% from 25-30%
due to strong underlying volume growth of 28% seen in 1HFY12. We estimate sales growth of
30% in FY2012E and believe this is indeed achievable with (1) volume growth of 26% in 2FHY12E
versus 28% in 1HFY12 and (2) higher inorganic growth in 2HFY12E versus 13% in 1HFY12.
We remain conservative and leave our FY2012-13E EPS largely unchanged
Despite higher sales growth in FY2012E, we leave our PAT unchanged due to (1) lower EBITDA
margin assumption at 19.6% (20.1% earlier), (2) increase in interest cost due to increase in debt
of Rs10 bn as of September 2011, (3) exceptional cost of Rs144 mn of 2QFY12. We include Rs800
mn of forex gain in 3QFY12E owing to realized gains on options outstanding against liabilities.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
United Phosphorus (UNTP)
Others
Strong quarter, forex only dampener. Forex drawbacks aside, which are likely to
reverse in 2HFY12E, results were strong with PAT ex-forex at Rs1.48 bn, beating our
Rs1.3 bn estimate due to very high sales growth at 40% versus our 22% estimate. We
raise sales growth to 30% (from 25%) and leave our FY2012-13E EPS largely
unchanged for lower margin. Maintain BUY with target price of Rs220 (unchanged).
Strong sales growth at 40% based on healthy volume and organic growth
Sales growth at 40% beat our estimate of 22%, led by (1) 31% volume growth reflecting the
strong underlying demand industry is witnessing, (2) pricing increase of 4%, up from 1% last
quarter, (3) organic growth of 25%, up from 17% in 1QFY11, and (4) inorganic growth of 15%,
10% in 1QFY12 due to consolidation of DVA Agro which registered sales of Rs2 bn in 2QFY12
and Rs400 mn from Rice Co. acquisition. Sales growth was led by—(1) India reported very strong
growth of 25% on a high base, (2) ROW sales more than doubled due to DVA consolidation
starting this quarter. However, Europe was a laggard with 3% sales growth, although it was a
seasonally weak quarter for EU and North America.
EBITDA margin down 80 bps yoy on account of raw material pressure
EBITDA margin (including other income) continued to remain under pressure, dropping 80 bps yoy
as witnessed in 1QFY12 due to lower gross margin yoy at 37% versus 40% last year on account of
raw material cost pressures although fixed overheads were down marginally qoq despite
consolidation of DVA this quarter. However, gross margin has improved qoq to 37% from 35% in
1QFY12 due to output price increases. We estimate FY2012E margin at 19.6% and estimate
2HFY12E margin at 19.7% versus 19.4% in 1HFY12 as (1) operating leverage benefit should play
out in 4QFY12E with (2) gross margin remaining steady at 36% as seen in 1HFY12.
We estimate FY2012E sales growth at 30%, lower end of guidance
UPL revised its FY2012E sales growth guidance second time in a row to 30-35% from 25-30%
due to strong underlying volume growth of 28% seen in 1HFY12. We estimate sales growth of
30% in FY2012E and believe this is indeed achievable with (1) volume growth of 26% in 2FHY12E
versus 28% in 1HFY12 and (2) higher inorganic growth in 2HFY12E versus 13% in 1HFY12.
We remain conservative and leave our FY2012-13E EPS largely unchanged
Despite higher sales growth in FY2012E, we leave our PAT unchanged due to (1) lower EBITDA
margin assumption at 19.6% (20.1% earlier), (2) increase in interest cost due to increase in debt
of Rs10 bn as of September 2011, (3) exceptional cost of Rs144 mn of 2QFY12. We include Rs800
mn of forex gain in 3QFY12E owing to realized gains on options outstanding against liabilities.
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