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United Phosphorus – Low Exposure to likely agri downturn

November 19, 2008

United Phosphorus has a steady earnings profile, Unlike fertilizers, agri chem is relatively well positioned to withstand the agriculture down cycle. Demand for agri chem is less elastic to economic cycles. Industry is consolidated with strong entry barriers and Benefits of Cerexagri integration would start reflecting from FY2010E.

3QFY09 results giving the street confidence in the ability of the company to deliver organic growth by sweating its assets and demonstration of improvement in margins through successful integration with Cerexagri.

United Phosphorous is expected to report an EPS of Rs 10.21 for FY09 and Rs 12.17 for FY10. Goldman Sachs reiterate Buy on United Phosphorus (Uphos) with a new 12-month price target of Rs 120 (earlier Rs 220) implying potential upside of 33% from the current level. The stock is currently trading at 7.4x FY10E P/E against its historical trading band of 12x-14x (since 2004)

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