Buy United Phosphorus Ltd - Motilal Oswal

United Phosphorus (UNTP IN; Mkt Cap USD1.5b, CMP Rs155, Buy)

UNTP's 3QFY11 operating performance was above estimates, with EBITDA margins of 19.8% and EBITDA of Rs2.48b . However MTM forex loss of ~Rs300m resulted in lower-than-expected PAT of Rs839b

Revenue grew by 7.8% to Rs12.48b driven by 15% volume growth. However, realizations were 3% lower and there was a 5% adverse forex impact.

The management has scaled down its revenue guidance to 5% revenue growth in FY11 (against 15% earlier), but maintained EBITDA margin guidance of 21%.

We are downgrading our EPS estimate for FY11 by 4.6% to Rs12.7 but maintain our FY12 EPS estimate of Rs17.3. Valuations of 8.9x FY12E EPS and 7.4x FY13E EPS, do not reflect growth potential (organic and inorganic). Maintain Buy with a target price of Rs208 (~10x FY13E EPS).

Source : Equity Bulls

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