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EARNINGS REVIEW
United Phosphorus (UNPO.BO)
Buy Equity Research
Above expectations on higher revenue growth; guidance raised
What surprised us
United Phosphorus reported 1QFY12 PAT of Rs1.8 bn vs our estimate of
Rs1.5 bn primarily on account of higher than expected revenue growth of
27% (8%-10% inorganic; about 17% organic) driven by: 1) volume growth
(up 23% yoy) in both US and Europe markets; 2) stabilization of pricing (up
1% yoy). However, gross margins declined by 300 bp primarily on account
of higher costs which could not be fully passed through to end consumers.
The management has revised its FY12 revenue guidance upwards to 25%-
30% from 12%-14% primarily on account of: 1) acquisition of DVA group
(operating in the highly lucrative Latin American market) which increases its
distribution reach geographically in Brazil and across various crops, and
2)organic growth in India and rest of the world. However, the weather so far
has been dry in Europe; it could be a key risk if it deteriorates further. The
management maintained FY12 EBITDA guidance of 20%-21%.
What to do with the stock
We reiterate Buy on Uphos and raise our 12-m SOTP-based TP to Rs190 (from
Rs175), implying upside potential of 14%. We raise FY12E/FY13E/ FY14E EPS
by 8%/3%/3%% primarily to reflect revenue growth of about 20% for FY12E
(from 12% earlier) vs guidance of 25%-30% as we await more visibility on
organic growth. We value the stock at mid-cycle FY12E EPS. 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. Key risks include adverse weather and regulatory changes.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
United Phosphorus (UNPO.BO)
Buy Equity Research
Above expectations on higher revenue growth; guidance raised
What surprised us
United Phosphorus reported 1QFY12 PAT of Rs1.8 bn vs our estimate of
Rs1.5 bn primarily on account of higher than expected revenue growth of
27% (8%-10% inorganic; about 17% organic) driven by: 1) volume growth
(up 23% yoy) in both US and Europe markets; 2) stabilization of pricing (up
1% yoy). However, gross margins declined by 300 bp primarily on account
of higher costs which could not be fully passed through to end consumers.
The management has revised its FY12 revenue guidance upwards to 25%-
30% from 12%-14% primarily on account of: 1) acquisition of DVA group
(operating in the highly lucrative Latin American market) which increases its
distribution reach geographically in Brazil and across various crops, and
2)organic growth in India and rest of the world. However, the weather so far
has been dry in Europe; it could be a key risk if it deteriorates further. The
management maintained FY12 EBITDA guidance of 20%-21%.
What to do with the stock
We reiterate Buy on Uphos and raise our 12-m SOTP-based TP to Rs190 (from
Rs175), implying upside potential of 14%. We raise FY12E/FY13E/ FY14E EPS
by 8%/3%/3%% primarily to reflect revenue growth of about 20% for FY12E
(from 12% earlier) vs guidance of 25%-30% as we await more visibility on
organic growth. We value the stock at mid-cycle FY12E EPS. 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. Key risks include adverse weather and regulatory changes.
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