United Phosphorus Limited Q1 FY23 Result Updates.

Higher EBITDA combined with lower finance costs drove robust growth in net profit.

United Phosphorus Limited reported net profit of Rs.  877 crores, jumped by 28.54% YoY from Rs. 677 crores. The net profit for the previous quarter was Rs. 1379 crores.

Q1 FY23 Revenue witnessed robust growth of 27% YoY to reach Rs. 10,821 crores from Rs. 8515 crores led by better product realizations (+18%), favorable exchange rate (+3%), and higher volumes (+6%).

Working capital was higher in Q1 FY23 primarily due to robust growth of 27% in sales, short-term inventory build-up due to strong demand and uncertainties in supply-chain, and an increase in receivables on the back of strong growth in LATAM. However, without reduced factoring and FX impact, the increase in net working capital on a sequential basis would have been lower at Rs. 1,931 crores.

Robust growth led by significant pick-up in realizations and higher volumes in a challenging macro-environment.

EBITDA grew by 26% YoY to Rs. 2,342 crore as against Rs. 1,862 crore in Q1 FY22. The EBITDA margin for the quarter is 21.6% .Significant uptick in realizations supported by efficient supply chain management aided in maintaining EBITDA margins despite inflationary. After a strong end to FY2022, the company continued to see solid growth momentum in Q1 FY23, as the strong agri commodity prices drove significant uptick in price realizations as well as healthy demand from growers. The EBITDA margin remained largely intact despite the significant input cost inflation and a challenging macro-economic environment exacerbated by geopolitical issues. This was driven by proactive pricing actions coupled with efficient supply chain management that led to the strong topline growth getting translated into robust operating profitability growth as well.

Better pricing and efficient supply chain management helped improve margins both YoY and sequentially. The EBITDA margin is marginally lower due to higher investments in SG&A as the company focused on building teams and capabilities to grow its differentiated and sustainable portfolio, and normalization of overheads post-Covid.

On 2nd August 2022, the stock closed at Rs. 736.95, down by 3.96%.

Valuations:

The return on equity (ROE) is 16.7% for the quarter ended June 2022. The price to earnings (P/E) ratio stood at 14.1. The return on capital employed (ROCE) for the company is 15.6%. The price to book value of  United Phosphorus Limited is 2.28. The EV/EBITDA is 24.5 and the EV/Sales is 7.43.