24 July, 2014 17:51 IST
`Buy` United Phosphorus; target Rs 200: Emkay
Source: IRIS Exclusive (31-JAN-12)
Comments  |  Post Comment

Emkay Global Financial Services has maintained `Buy` on United Phosphorus with a price target of Rs 200 as against the current market price (CMP) of Rs 144 in its report dated Jan. 30, 2012. The broking house gave the following rationale:

Revenue growth of 58% led by exchange impact and acquisition:

UPL reported revenues of Rs 19.3billion, +58% yoy higher than our estimates of Rs 17 billion. 19% positive impact of exchange fluctuation along with 8% price inflation drove revenue growth. Revenue contribution of Rs 3 billion from Brazilian acquisitions also contributed to topline growth while organic growth remains subdued at 6%.

North America (62% yoy growth) and RoW (91%) lead topline growth during the quarter along with pick up in Europe (31% yoy growth). Growth in India however slowed down to 15% yoy compared to 25%+ growth witnessed in domestic markets in last 3 quarters. RoW revenues of Rs 9.3 billion (+91%) are primarily led by acquisitions.

APAT below est due to higher tax and losses in joint ventures:

Consol EBITDA of Rs 3.5 billion, +57% yoy, is higher than est of Rs 3billion driven by higher topline. However EBITDA margins at 18.1% was broadly in line with est. Currency fluctuation adversely affected employee cost (increased by 50% yoy/29% qoq to Rs 1.9 billion) and tax outgo (effective tax rate increased to 33% as against 20-25%). Repricing of income statement and higher profit from India driven by amalgamation of its Mauritius entity adversely affected tax provisioning however the same is likely to reverse with appreciation in INR. JV in Brazil - SIPchem also reported losses of Rs 120 mn as a result APAT at Rs 1.15 billion (+4%yoy) was below our est of Rs 1.5 billion.

Domestic markets growth slowed down to 15% yoy in Q3:

UPL’s domestic growth slowed down to 15% yoy compared to 25%+ growth witnessed in domestic markets in previous 3 quarters. As highlighted earlier, we expect domestic markets to remain under pressure in the near term due to declining farm incomes and shrinking farm profitability. However, slowdown in domestic rural markets is likely to have a limited impact on UPL (Q,N,C,F)* due to lower share (20-25%) from Indian markets.

Downgrade FY12/FY13 est and target price, maintain Buy:

Management maintained its guidance of 35%-40% topline growth for FY12 with EBITDA margins of 19-20%. However despite higher topline growth with lower PAT in current quarter and pressure on margins we have downgraded our FY12/FY13 est by 10%/7% to Rs 16 / 19.9. Subsequently we have also reduced our price target from Rs 215 to Rs 200 (10x FY13 est EPS) however maintain Buy on attractive valuations. At CMP stock is trading at 7.2x 1year fwd earnings, compared to average of 13x enjoyed historically.

Click here to view full report

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.

Live News
Rupee remains stable against dollar to settle at 60.10 - 24-Jul-2014 17:31
Diamond Offshore Q2 profit plunges as sales, margin fall - 24-Jul-2014 17:30
CoreLogic Q2 earnings plummet, miss forecasts - 24-Jul-2014 17:09
India needs strong law for benefit of mankind: PK Malhotra - 24-Jul-2014 17:00
Umpqua Holdings Q2 profit plunges, but beats estimate - 24-Jul-2014 16:57
Experts welcome hike in FDI for insurance industry - 24-Jul-2014 16:55
Tractor Supply Company Q2 earnings climb, miss estimates - 24-Jul-2014 16:48
India's mobile services market to reach USD 19.2 bn in 2014: Gartner - 24-Jul-2014 16:45
FDI cap of 49% in insurance industry is a welcome move: Rajesh Sud - 24-Jul-2014 16:40
AT&T Q2 profit falls but still beats estimates - 24-Jul-2014 16:28
FICCI welcomes CBDT's action plan to dispose of 90% high value pending appeals - 24-Jul-2014 16:25
* Q - Quote , N - News , C - Chart , F - Financials
Comments Post comment 
 Post Comment
Name Email
Security Code type   wdbdtr into this box
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |   Forums  |   E-mail  |   Advertise
© All rights reserved. IRIS Business Services Limited
A Disclaimer