Stock Market Result Update on United Phosphorus for 2QFY2012

Stock Market Result Update on United Phosphorus for 2QFY2012 with a Buy recommendation and a Target Price of `180 (12 months).

For 2QFY2012, United Phosphorus’s (UPL) revenue grew by 40.5% yoy to `1,721cr and net PAT declined by 50.4% to `56.9cr. Management has increased its revenue guidance to 30-35% for FY2012, compared to 25-30% revenue growth guided at the end of FY2011. Management has also reaffirmed its OPM guidance at 19-20%. At `143, the stock is quoting at attractive valuations of 9.3x FY2012E EPS and 8.6x FY2013E EPS. Hence, we maintain our Buy rating on the stock.

Strong revenue growth: UPL reported strong revenue growth of 40.5% yoy to `1,721cr during 2QFY2012. Robust growth was supported by a 25% yoy increase in India business and 48% growth in the international business. US, UPL’s key market, witnessed 12% growth in sales, while Europe and RoW posted robust growth of 3% and 105%, respectively. Revenue growth was impacted by 5% due to the unfavorable exchange variance. However, volumes continued to be strong, moving up by 31% in 2QFY2012.

Outlook and valuation: We expect UPL to post a CAGR of 13% and 14% in its sales and PAT over FY2011-13, respectively. At current valuations of 9.3x FY2012E EPS and 8.6x FY2013E EPS, the stock is attractively valued. Hence, we maintain our Buy recommendation on the stock with a revised target price of `180.