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Accumulate United Phosphorus; target Rs 172: Emkay
21 Jul 2012, 04:52 PM
Emkay Global Financial Services is bullish on United Phosphorous and has recommended accumulate rating on the stock with a target of Rs 172 in its July 20, 2012 research report.

"United Phosphorus consol revenues increased by 19% yoy to Rs 22.1bn (higher than est) primarily driven by higher than estimated revenues from India. Exchange gain contributed 11% to growth while pricing increased by 5% with the balance 4% being contributed by volumes. Organic growth remains muted. Indian revenues grew by 16% yoy (driven by both price and volumes) while North American revenues grew by 32% yoy (mainly on account of currency depreciation). Europe and RoW market grew by 12%-15%."

"Though gross margins improved by 300bps yoy to 38%, EBITDA margins at 17.5% was below est. Seasonally weak quarter in Brazil pulled margins down however management is confident of aligning margins in Brazil market in line with companys margins by FY13- 14 through various synergies. UPLs PAT of Rs 2.2bn, +31% yoy, is adjusted for 1) Rs MTM loss of Rs 280mn included in interest cost and 2) MTM gain of Rs 100mn included in other income. Due to losses in Brazilian subsidiary company reported negative minority interest of Rs 0.3bn and reported profit stood at Rs 2bn."

"Erratic weather patterns globally pose key risks for agrochem industry in the near term. US is facing its worst drought in 25 years while Europe has witnessed one of the wettest seasons ever. Indian monsoons have been deficient which has impacted sowing of crops. Synergy benefit in Brazil and RoW markets, aggressive products launch in domestic markets through tie ups with global players and inorganic growth opportunities are key driving factors for the company."

"UPLs acquisition of SD Agchem is likely to strengthen its European presence & enhance its product offerings. Management maintained its guidance of 15% revenues growth while they expect Brazilian margins to improve gradually. We est revenue / EBITDA / PAT growth of
 
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