Buy United Phosphorus; target Rs 180: Unicon Investment

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Buy United Phosphorus; target Rs 180: Unicon Investment

Unicon Investment is bullish on United Phosphorus (UNTP) and has recommended buy rating on the stock with a target price of Rs 180 in its August 17, 2011 research report.

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Unicon Investment is bullish on United Phosphorus  (UNTP) and has recommended buy rating on the stock with a target price of Rs 180 in its August 17, 2011 research report.

"United Phosphorus Ltd (UNTP) posted strong result in Q1 FY12 registering ~27% YoY growth in revenues to INR 18,220mn. Growth in revenue was driven by 25% increase in volume and 1% rise in prices. Organic volume increased by 17% while acquisitions showed 8% growth in volumes. Strong revenue growth was seen in all geographies- rest of world 35%, India 32%, North America 32% and EU 6% on YoY basis. Latin America also continued the growth trend in agrochemical sales."

"UNTP recently acquired 51% stake in DVA Agro Brasil (DVA) for USD150mn to strengthen its position in Latin America. DVA, which posted revenue of USD 130mn in CY10, is a formulator and marketer of crop protection products in Brazil. It caters the requirements of USD 7bn Brazilian agro-chemical market. UNTP would infuse cash of ~USD100mn while remaining portion would be used for buyouts. DVA is currently building new capacities for new product categories. EBITDA increased by 19% YoY to INR 3,449mn with 117bps reduction in EBITDA margin to 18.5%. Net profit soared by 29% YoY to INR 1,866mn in the quarter. Profit Margin remained flat at ~9.8% despite abnormal increase in tax provisions."

"UNTP would benefit from healthy monsoon scenario in FY12 and integration of subsidiaries- DVA, Sipcam Isagro Brazil and Cerexagri. The management has increased its revenue guidance to 25-30% sales growth vs. 12-14% stated previously for FY12. EBITDA margin is expected to stay ~21% level. Growth in sales would be driven by increase in volume in present business and acquisitions. UNTP continues to maintain high level of cash for suitable acquisition in its portfolio. Stock is currently trading at 7.1x its FY13E earnings. We recommend BUY with a long price target of INR 180," says Unicon Investment research report.

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To read the full report click on the attachment