united phosphorus 4q fy 2013

7/30/2019 United Phosphorus 4Q FY 2013

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Please refer to important disclosures at the end of this report 1

Y/E March (` cr) 4QFY2013 3QFY2013 % chg (qoq) 4QFY2012 % chg (yoy)

Net sales 2,773 2255 22.9 2119 30.8

Other income 66 68 0.0 25 168.2

Gross profit 1322 1100 20.2 1001 32.0

Operating profit 489 364 34.3 354 37.9

Adj. net Net profit 292 173 68.6 205 42.9

Source: Company, Angel Research

For 4QFY2013, United Phosphorus (UPL)’ revenue grew by 30.8% yoy to ` 2,773cr

and Adj. net PAT grew by 42.9% to ` 292cr. For FY2014, the Management has

maintained its guidance of a revenue growth of 12-15% and of OPM (incl. otherincome) expanding by 100bp. However, even after factoring in the conservative

numbers, the stock is quoting at an attractive valuation of 6.0x FY2015E EPS and

hence, we maintain our Buy rating on the stock.

Robust growth: The company has reported a top-line growth of 30.8% yoy for the

quarter to ` 2,773cr. The top-line growth was driven by both exports and domestic

business, which grew by 25.0% and 33.0% respectively. The exports growth came

on the back of North America and Europe, which grew by 49% and 37%

respectively. The top-line growth was driven by a 16% volume growth, while the

price rise was of around 4%. The exchange impact on sales growth was of around

12%. On the operating front, the company reported an EBITDA margin expansion

of 91bp to 17.6% (16.7% in 4QFY2012). This aided the net profit to grow by

37.9% yoy to end the period at ` 278cr, on back of top-line growth.

Outlook and valuation: We expect UPL to post a CAGR of 12.0% and 14.2% in its

sales and PAT respectively, over FY2013-15. At the current valuation of 6.0x

FY2015E EPS, the stock is attractively valued. Hence, we maintain our Buy

recommendation on the stock with a revised target price of `232.

Key financials (Consolidated)

Y/E March (`

cr) FY2012 FY2013E FY2014E FY2015ETotal revenue 7,534 9,010 10,298 11,310

% chg 30.8 19.6 14.3 9.8

Adj. profit 561 786 907 1,025

% chg 1.6 40.0 15.3 13.1

EBITDA (%) 16.5 16.1 16.5 16.5

EPS (`) 12.2 17.8 20.5 23.2

P/E (x) 11.4 7.8 6.8 6.0

P/BV (x) 1.5 1.3 1.1 1.0

RoE (%) 14.2 17.8 18.0 17.4

RoCE (%) 16.1 14.9 15.7 15.8

EV/Sales (x) 1.0 0.9 0.7 0.6

EV/EBITDA (x) 6.2 5.6 4.3 3.6


BUYCMP ` 139

Target Price ` 232

Investment Period 12 Months

Stock Info

Sector

2,379

Bloomberg Code

Shareholding Pattern (%)

Promoters 28.9

MF / Banks / Indian Fls 26.5

FII / NRIs / OCBs 34.6

Indian Public / Others 10.0

Abs. (%) 3m 1yr 3yr

Sensex (4.1) 12.6 8.7

UPL 0.5 22.3 (6.6)

Agrichemical

Avg. Daily Volume

Market Cap ( ` cr)

Beta

52 Week High / Low

6,307

0.8

144/105

209852

Net Debt ( ` cr)

UNTP@IN

Face Value ( ` )

BSE Sensex

Nifty

Reuters Code

2

19,287

5,871

UNPO.BO

Sarabjit Kour Nangra

+91-22-3935 7800 ext. 6806

[email protected]

United Phosphorus

Performance Highlights

4QFY2013 Result Update | Agrichemical

April 26, 2013



United Phosphorus | 4QFY2013 Result Update

April 26, 2013 2

Exhibit 1: 4QFY2013 Performance (Consolidated)

Y/E March (` cr) 4QFY2013 3QFY2013 % chg (qoq) 4QFY2012 % chg (yoy) FY2013 FY2012 % chg

Net sales 2,773 2,255 22.9 2,119 30.8 9,010 7,534 19.6

Other income 66 68 25 168.2 284 229 23.9Total income 2,839 2,324 22.2 2,144 32.4 9,294 7,764 19.7

Gross profit 1322 1100 20.2 1001 32.0 4323 3476 24.4

Gross margin (%) 47.7 48.8 47.2 48.0 46.1

Operating profit 489 364 34.3 354 37.9 1442 1206 19.6

Operating margin (%) 17.6 16.1 16.7 16.0 16.0

Financial cost 130 101 28.2 69 88.7 429 415

Depreciation 102 96 6.3 79 29.1 354 292 21.0

PBT 323 235 37.7 231 39.8 944 729 29.5

Provision for taxation 19 69 (72.9) 4 404.1 203 128 58.7

PAT Before Exc. And MI 305 166 83.2 228 33.9 741 601 23.3

Minority 6 3 9 (2) 5

Income from Associate (19) 11 (17) 32 (40)

Extra ordinary Income/( Exp.) (14) 0 (3) (12) (15)

Reported PAT 278 173 60.5 202 37.9 775 556 39.4

Adjusted PAT 292 173 68.6 205 42.9 786 571 37.8

EPS (`) 6.4 3.8 4.5 17.3 12.5


Double digit top-line growth

For 4QFY2013, the top-line grew by 30.8% to ` 2,773cr. The top-line growth was

driven by both exports and the domestic business, which grew by 25.0% and33.0% respectively.

The exports growth came on the back of North America and Europe, which grew

by 49% and 37% respectively. Latin America also grew strongly by 34%, while Rest

of the world grew by only 13% during the period.

The top-line growth was driven by a 16% volume growth, while the price rise was

around 4%. The exchange impact on sales growth was of around 12%.

Exhibit 2: Sales performance

2,119 2,180

1,802

2,255

2,773

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

4QFY2012 1QFY2013 2QF Y2013 3QFY2013 4QFY2013

( `

c r )


Exhibit 3: Growth break-up

12

4

16

0

2

4

6

8

10

12

14

16

18

Exchange impact Realisation Volume

( % )





April 26, 2013 3

Exhibit 4: Volume and realisation break-up (yoy)

4 5 52

4

12

4

15 16

0

5

10

15

20

25

30

35

40

4QFY2012 1QFY2013 2QFY2013 3QFY2013 4QFY2013

( % )

Realisation Volume


EBITDA margin remains steady

During 4QFY2013, the gross profit margin expanded by 50bp yoy on back of an

improved sales mix, which aided the operating margin to expand by 91bp to end

the period at 17.6%.

Exhibit 5: EBITDA margin trend

1716

15

16

18

10

11

12

13

14

15

16

17

18

19

20


( % )


Adj net profit grew 42.9% yoy

While the operating profit for the quarter grew 37.9% yoy, the adjusted net profit

posted a higher 42.9% yoy growth aided by other income, which came in at ` 66cr

vs ` 25cr in 4QFY2012. Thus the adjusted net profit came in at ` 292cr V/s ` 205cr

during the corresponding period of last year.




April 26, 2013 4

Exhibit 6: Adjusted PAT trend

205 203

120

173

292

(20)

(10)

0

10

20

30

40

50

60

70

80

90

0

50

100

150

200

250

300

350


( % )

( `

c r )

Adj PAT % YoY





April 26, 2013 5

Investment arguments

Innovators dominant in the off-patent space; Generic firms in

a sweet spot

The global agrichem industry, valued at US$40bn (CY2008), is dominated by the

top six innovators, viz Bayer, Syngenta, Monsanto, BASF, DuPont and Dow, which

enjoy a large market share of the patented (28%) and off-patent (32%) market.

The top six innovators enjoy a large share of the off-patent market due to high

entry barriers for pure generic players. Thus, one-third of the total pie worth

US$13bn, which is controlled by the top six innovators through proprietary off-

patent products, provides a high-growth opportunity for larger integrated generic

players such as UPL.

Generic segment’s market share to increase

Generic players have been garnering a high market share, increasing from 32%

levels in 1998 to 40% by 2006-end. The industry registered a CAGR of 3% over

1998-2006, while generic players outpaced the industry with a CAGR of 6%.

Going ahead, given the opportunities and a drop in the rate of new molecule

introduction by innovators, we expect generic players to continue to outpace the

industry’s growth and increase their market share in the overall pie. Historically,

global agrichem players have been logging in-line growth with global GDP. Going

ahead, over CY2013-14, the global economy is expected to grow by 3-4%.

Assuming this trend plays out in terms of growth for the agrichem industry and the

same rate of genericisation occurs, the agrichemical generic industry could log in

6-8% yoy growth during the period and garner a market share of 44-45%.

A global generic play

UPL figures among the top five global generic agrichemical players with presence

across major markets including the US, EU, Latin America and India. Given the

high entry barriers by way of high investments, entry of new players is also

restricted. Thus, amidst this scenario and on account of having a low-cost base,

we believe UPL enjoys an edge over competition and is placed in a sweet spot to

leverage the upcoming opportunities in the global generic space.




April 26, 2013 6

Outlook and valuation

Over the last few years, the global agriculture sector has been

rejuvenating/reviving on the back of rising food prices. Food security is also a top

priority for most governments; reducing food loss is one of the easiest ways to

boost food inventory. Hence, we believe agrichemical companies would continue

to do well in the wake of heightened food security risks, and strong demand is

likely to be witnessed across the world. Overall, we expect the global agrichemical

industry to perform well from here on. However, generics are expected to register

healthy growth due to a) increasing penetration and wresting market share from

innovators and b) patent expiries worth US$3bn–4bn (2007) during 2009-14.

We estimate UPL to post a 12.0% and 14.2% CAGR in sales and PAT, respectively,

over FY2013-15. The stock is trading at an attractive valuation of 6.0x FY2015E

EPS. Hence, we maintain our Buy recommendation on the stock with a target price

of `232.

Exhibit 7: Key assumption

FY2014E FY2015E

Sales growth 14.3 9.8

EBITDA margin 16.5 16.5

Tax rate 20.0 20.0


Exhibit 8: P/E band

0

50

100

150

200

250

300

350

J a n - 0 6

S e p - 0 6

M a y - 0 7

J a n - 0 8

S e p - 0 8

M a y - 0 9

J a n - 1 0

S e p - 1 0

M a y - 1 1

D e c - 1 1

A u g - 1 2

A p

r - 1 3

9.0x 11.0x 13.0x 15.0x 17.0x


Exhibit 9: Peer valuation

Company Reco Mcap CMP TP Upside P/E (x) EV/Sales (x) EV/EBITDA (x) RoE (%) CAGR (%)

(` cr) (`) (`) (%) FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E Sales PAT

Rallis Neutral 2,422 125 - - 16.3 14.1 1.6 1.3 11.1 9.4 22.2 21.9 15.0 20.5

United Phosphorus Buy 6,307 139 232 66.9 6.8 6.0 0.7 0.6 4.3 3.6 18.0 17.4 12.0 14.2

Source: Company, Angel Research, Bloomberg




April 26, 2013 7

Company Background

United Phosphorus Ltd (UPL) is a global generic crop protection, chemicals and

seeds company. The company is fully backward and forward integrated by taking

advantage of the consolidation opportunities within the agrochemical industry. UPL

is the largest Indian agrochemical company and had revenue of about US$1.3mn

for year ended March 2011.

Profit & Loss Statement (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EE

Net Sales 5,290 5,761 7,534 9,010 10,298 11,310

Other operating income 118 137 121 184 184 184

Total operating income 5,408 5,805 7,655 9,195 10,114 11,125

% chg 9.7 7.3 31.9 20.1 10.0 10.0

Total Expenditure 4,461 5,018 6,288 7,556 8,595 9,439

Net Raw Materials 2,954 2,902 4,058 4,687 5,547 6,092

Other Mfg costs 839 1,191 1,267 1,684 1,731 1,901

Personnel 502 515 686 853 938 1,030

Other 166 410 277 332 379 416

EBITDA 947 1,111 1,246 1,454 1,703 1,870

% chg 0.2 17.3 12.2 16.7 17.1 9.8

(% of Net Sales) 17.9 19.3 16.5 16.1 16.5 16.5

Depreciation& Amortisation 215 214 292 354 378 399

EBIT 732 897 1,075 1,285 1,510 1,656

% chg (2.6) 22.5 19.9 19.5 17.5 9.7(% of Net Sales) 13.5 15.5 14.0 14.0 14.9 14.9

Interest & other Charges 145 312 415 429 511 511

Other Income 34 214 109 100 100 100

(% of PBT) 6 32 14 10 9 8

Recurring PBT 621 678 769 956 1,099 1,246

% chg 23.8 9.2 13.3 24.3 15.0 13.3

Extraordinary Expense/(Inc.) (23) 5 18 12 - -

PBT (reported) 598 664 751 944 1,099 1,246

Tax 81 73 128 203 220 249

(% of PBT) 13.6 11.0 17.0 21.5 20.0 20.0

PAT (reported) 517 591 623 741 879 997

Add: Share of earnings of asso. 19 (23) (35) 32 35 37

Less: Minority interest (MI) 6 10 5 (2) (2) (2)

Prior period items 3 - 27 - 9 10

PAT after MI (reported) 526 558 556 775 907 1,025

ADJ. PAT 549 552 561 786 907 1,025

% chg 17.9 0.6 1.6 40.0 15.3 13.1

(% of Net Sales) 10.4 9.6 7.5 8.7 8.8 9.1

Basic EPS (`) 12.5 12.0 12.2 17.8 20.5 23.2

Fully Diluted EPS (̀ ) 12.5 12.0 12.2 17.8 20.5 23.2

% chg 17.9 (4.3) 1.6 46.1 15.3 13.1




April 26, 2013 8

Balance Sheet (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

SOURCES OF FUNDS

Equity Share Capital 88 92 92 89 89 89

Preference Capital - - - - - -

Reserves& Surplus 2,904 3,634 4,081 4,557 5,348 6,257

Shareholders’ Funds 2,992 3,726 4,173 4,645 5,436 6,346

Minority Interest 14 18 250 234 233 231

Total Loans 2,419 1,497 3,245 3,927 3,927 3,927

Other Long term liabilities

42 301 395 395 395

Long Term Provisions 31 51 51 51 51

Deferred Tax Liability 11 (8) (6) (13) (13) (13)

Total Liabilities 5,437 5,307 8,014 9,239 10,029 10,937

APPLICATION OF FUNDS

Gross Block 3,210 3,947 4,687 5,244 5,544 5,844

Less: Acc. Depreciation 1,920 2,174 2,605 2,959 3,337 3,735

Net Block 1,290 1,773 2,082 2,284 2,207 2,108

Capital Work-in-Progress 41 57 306 306 306 306

Goodwill / Intangilbles 482 548 1,141 1,277 1,277 1,277

Investments 761 823 795 1,025 1,025 1,025

Long Term Loan & Adv. 220 259 269 354 388

Current Assets 4,324 4,777 5,671 7,162 7,922 9,194

Cash 1,578 700 1,566 1,548 2,310 3,031

Loans & Advances 469 587 326 786 445 489

Other 2,277 3,490 3,780 4,828 5,167 5,674

Current liabilities 1,462 2,890 2,240 3,084 3,061 3,362

Net Current Assets 2,863 1,886 3,432 4,078 4,861 5,832

Others - - - - - -

Total Assets 5,437 5,307 8,014 9,239 10,029 10,937




April 26, 2013 9

Cash Flow Statement (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

Profit before tax 598 664 751 944 1,099 1,246

Depreciation 215 214 292 354 378 399Change in Working Capital 655 99 (680) (664) (20) (250)

Less: Other income - - - - - -

Direct taxes paid (81) (73) (128) (203) (220) (249)

Cash Flow from Operations 1,387 904 235 431 1,237 1,145

(Inc.)/ Dec. in Fixed Assets 175 (753) (989) (557) (300) (300)

(Inc.)/ Dec. in Investments (328) (62) 29 (231) - -

Inc./ (Dec.) in loans and adv. - - - - - -

Other income - - - - - -

Cash Flow from Investing (153) (815) (961) (787) (300) (300)

Issue of Equity - 312 - - - -

Inc./(Dec.) in loans (285) 922 1,747 (682) - -

Dividend Paid (Incl. Tax) (77) (103) (116) (116) (116) (116)

Others 152 (455) (41) 1,137 (59) (8)

Cash Flow from Financing (210) 676 1,591 339 (175) (124)

Inc./(Dec.) in Cash 1,024 (878) 866 (18) 762 721

Opening Cash balances 554 1,578 700 1,566 1,548 2,310

Closing Cash balances 1,578 700 1,566 1,548 2,310 3,031




April 26, 2013 10

Key Ratios

Y/E March FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

Valuation Ratio (x)

P/E (on FDEPS) 11.1 11.6 11.4 7.8 6.8 6.0P/CEPS 8.0 8.4 7.5 5.4 4.8 4.3

P/BV 2.0 1.7 1.5 1.3 1.1 1.0

Dividend yield (%) 1.4 1.4 1.8 1.9 1.9 1.9

EV/Sales 1.3 1.2 1.0 0.9 0.7 0.6

EV/EBITDA 7.2 6.1 6.2 5.6 4.3 3.6

EV / Total Assets 1.3 1.3 1.0 0.9 0.7 0.6

Per Share Data (`)EPS (Basic) 12.5 12.0 12.2 17.8 20.5 23.2

EPS (fully diluted) 12.5 12.0 12.2 17.8 20.5 23.2

Cash EPS 17.4 16.6 18.5 25.8 29.0 32.2

DPS 2.0 2.0 2.5 2.6 2.6 2.6

Book Value 68.1 80.7 90.4 105.0 122.8 143.4

DuPont Analysis

EBIT margin 13.5 15.5 14.0 14.0 14.9 14.9

Tax retention ratio 86.4 89.0 83.0 78.5 80.0 80.0

Asset turnover (x) 1.5 1.5 1.6 1.5 1.5 1.7

ROIC (Post-tax) 18.0 20.2 18.6 16.0 18.4 19.8

Cost of Debt (Post Tax) 5.9 14.2 14.5 9.4 10.4 10.4

Leverage (x) 0.4 0.2 0.3 0.5 0.4 0.2

Operating ROE 23.3 21.6 19.9 19.1 21.7 21.9

Returns (%)

ROCE (Pre-tax) 14.3 16.7 16.1 14.9 15.7 15.8

Angel ROIC (Pre-tax) 23.4 19.2 22.8 20.9 22.6 24.4

ROE 19.4 16.4 14.2 17.8 18.0 17.4

Turnover ratios (x)

Asset Turnover (Gross Block) 1.7 1.6 1.8 1.9 1.9 2.0

Inventory / Sales (days) 91 76 78 82 87 89

Receivables (days) 85 87 79 82 87 89

Payables (days) 80 96 66 68 70 71

WCcycle (ex-cash) (days) 111 78 74 89 90 86

Solvency ratios (x)Net debt to equity 0.4 0.2 0.3 0.5 0.4 0.2

Net debt to EBITDA 1.7 0.9 0.7 1.3 1.6 0.9

Interest Coverage (EBIT / Int.) 5.0 2.9 2.6 3.0 3.0 3.2




April 26, 2013 11

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement UPL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

united phosphorus 4q fy 2013

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