Statistical Abstract

Year to Net Profit Diluted EPS EPS growth P/E P/B ROE Yield

31 Mar (RsM) (Rs) (%) (x) (x) (%) (%)

2006A 2,163 11.34 20.4 30.3 5.1 21.0 0.3

2007A 2,897 14.41 27.1 23.9 4.6 20.9 0.3

2008E 3,877 19.28 33.8 17.9 3.9 23.8 0.4

2009E 5,775 28.72 49.0 12.0 3.0 28.3 0.4

2010E 7,145 35.53 23.7 9.7 2.3 26.9 0.4

United Phosphorus (UNPO.BO)

Buy: Management Meeting Reinforces Confidence

ƒæ Maintain Buy (1L) — as our meeting with management reinforces our

confidence in UPL’s growth prospects. The restructuring of Cerexagri is on

track with material upside in financials to come from 4Q08. The high valuation

at which the less efficient Arysta was acquired recently also underpins the

attractiveness of the crop chemicals space in general, and UPL in particular.

ƒæ Reiterates guidance — UPL reiterated its guidance of 15-20% top-line growth

(organic) and FY09E EBIDTA margins of 22-23%, which is very creditable in

our view given the pressures from rising crude prices and rupee appreciation.

We forecast 54% CAGR in net profit over FY08-10E.

ƒæ Cerexagri update — UPL indicated that it was on course to complete the

restructuring and integration of Cerexagri’s French operations by the end of

FY08. Besides, it intends to start this process in Spain in the next quarter. With

the restructuring of US operations already complete, we expect material upside

to reflect in financials from 4QFY08 and act as a key catalyst for the stock.

ƒæ Upbeat on Advanta — UPL remains upbeat on its seeds business, Advanta

(49% holding), due to low penetration of hybrid seeds in India and better buying

ability of farmers on back of the recent buoyancy in food prices. Its healthy

sunflower oil (Nutrisun) project is also on course for launch in late CY09.

ƒæ Nufarm in play once again? — Nufarm has announced that the US$2.6bn

conditional takeover proposal by ChemChina has fallen through. We believe

this could bring Nufarm back into play as a potential target. In such a scenario,

UPL could be one of the main bidders, especially given that it is well placed on

the balance sheet front following its recent US$475m fund raising.

 

 

Edited by BGKGURU - 11/Dec/2007 at 1:53pm

united phosphorus is quoting at a P/E of 10 with decent growth and ROE
the company also owns some intellectual property in form of registrations and patents

from a broker report
http://breport.myiris.com/INFOLINE/SEACHEIN_20101104.pdf

To benefit from rise in prices of soft commodities
Since July, soft commodity prices have rallied significantly with wheat prices up 36%, corn up 51% and palm oil up 33%. Further, weather patterns in Latin and North America have improved and have became conducive for additional sowing. We believe the rally in soft commodities supported by favorable weather conditions will translate into higher farm incomes. This would improve demand for agri-inputs in developed markets. Since United Phosphorous (UPL)derives ~65% of its revenues from exports, H2 FY11 is likely to witness a robust 22% rise in revenues.

FY11 guidance intact despite subdued Q2; Good growth in H2 Q2 revenues grew 9.6% yoy primarily on back of robust domestic sales (up 45% yoy). Despite a healthy 13% volume growth, adverse currency movements and 2% decline in export revenues led to a subdued topline. Lower raw material costs aided a 150bps margin expansion. Despite a subdued topline, management retained its FY11 guidance of 10-15% growth in consolidated sales coupled with ~200bps improvement in OPM

Inorganic growth possibilities with surplus cash, low leverage As of Sep’ 10, UPL had an estimated cash to the tune of ~Rs20bn (22% of Mcap, Rs45/share) which leaves enough room for greenfield expansion as well as acquisitions. Over the past decade, it has acquired 17 companies, transforming itself in to the 12th largest
agrochemical and 3rd largest generic agrochemical player globally.
Recently, the company has acquired non-mixture Mancozeb
(Manzate brand) from DuPont to strengthen its Mancozeb business in North and South America. A lean balance sheet with FY10 gross D/E at 0.3x also lends support for inorganic initiatives.

Big opportunity; attractive valuations
We expect UPL to benefit from 1) Rise in soft commodity prices 2) Jump in domestic agri-demand (due to stellar monsoon season) and 3) Stability in raw-material prices. Further, products related to agriinputs, which generate ~US$4bn in annual sales, will go off-patent globally by 2014. This creates opportunity for generic players like
UPL given its strong distribution network, lean balance sheet and successful acquisitions track record. We value the stock at 13x FY12 EPS and recommend BUY with a target price of Rs238.

I work for this company and I can say with confidence that the management has high integrity and have a great vision for the company. Good long term story! The company has high focus on patents in India and worldwide. In fact, less people know that this company was awarded the first exclusive marketing right in India for one of their products.