United Phosphorus - 1QFY2014 Result Update - Angel Broking

For 1QFY2014, United Phosphorus (UPL)' revenue grew by 10.5% yoy to Rs.2,410cr and Adj. net PAT grew by 4.8% yoy to Rs.213cr. For FY2014, the Management has maintained its guidance of a revenue growth of 12-15% and OPM (incl. other income) expansion of 100bp. However, even after factoring in the conservative numbers, the stock is quoting at an attractive valuation of 6.3x FY2015E EPS and hence, we maintain our Buy rating on the stock.

OPM improves yoy : The company has reported a top-line growth of 10.5% yoy for the quarter to Rs.2,410cr. The top-line growth was driven by the domestic business, which grew by 24.0%. Among the key markets - North America degrew by 23% and Europe posted a growth of 18%. Other key markets which showed significant improvement were RoW, which posted a growth of 43% yoy, and Latin America which grew by 12% yoy. The top-line growth was driven by a 7% volume growth, while the price rise was of around 2%. The exchange impact on sales growth was of around 2%. On the operating front, the company reported an EBITDA margin expansion of 80bp to 17.0% (16.2% in 1QFY2013). This aided the net profit to grow by 4.8% yoy to end the period at Rs.213cr, on account of a high interest expense.

Outlook and valuation: We expect UPL to post a CAGR of 12.0% and 15.0% in its sales and PAT respectively, over FY2013-15. At the current valuation of 6.3x FY2015E EPS, the stock is attractively valued. Hence, we maintain our Buy recommendation on the stock with a revised target price of Rs.225.

Source : Equity Bulls

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