June 7, 2012 UNITED PHOSPHORUS LTD BUY

United Phosphorus Ltd (UPL) is the leading producer of agriculture chemicals in India and the world. The company produces crop protection products, intermediaries, specialty chemicals and other chemicals. UPL has its presence across value added agri inputs ranging from seeds to crop protection and post harvest activities. The company is a global player in this area and has its presence across 120 countries.

Recommendations <= 1 year Strong Buy Buy Hold Reduce Sell

1 - 2 yrs

2 - 5 yrs

UPL ranks amongst the top 5 post- patent agrochemical manufacturers in the world. Through
acquisitions, strategic alliances and subsidiaries, the company has built a network across the globe and operates across 21 manufacturing sites (9 in India, 4 in France, 2 in Spain, 1 each in UK, Vietnam, Argentina, Netherlands, Italy and China).

Strong Buy Expected Returns > 20% p.a. Buy Expected Returns from 10 to 20% p.a. Hold Expected Returns from 0 % to 10% p.a. Reduce Expected Returns from 0 % to 10% p.a. with possible downside risk Sell Returns < 0 %

The company follows a strategy of filing its own registrations globally and acquiring tail end
brands of global majors in a highly regulated agro chemicals markets such as Europe and North America. It is the only Indian play in the international generic agrochemicals market and in our opinion makes an attractive bet in the long run.

STOCK DATA
BSE / NSE Code Bloomberg Code No. of Shares (Mn) Sensex / Nifty 512070 / UNIPHOS UNTP IN Equity 462 16020/ 4863 112 0.8 51,745 171.70 / 104.10 169,724

In Q1 and Q2 of FY13, the company has plan to launch two new insecticide (flonicamid and
chlorfluazron) varieties in India for different set of crops (rice, vegetables, cotton etc) which is
expected to get good response in the Indian market which can drive the volume growth in India operations.

PRICE DATA
CMP Rs (5th June 12) Beta Market Cap (Rs mn) 52 Week High-low Average Daily Volume

Brazilian acquisitions DVA Agro Brazil and Sipcam Isagro Brazil are expected to help drive
volume growth in the near future and additionally will reduce the seasonality in the business.

STOCK RETURN (%)

30D
UPL Sensex Nifty Promoter Institutional Non Institutional Total -6.5 -4.8 -4.4

3M
-16.8 -7.7 -7.9

6M
-14.8 -4.7 -3.5

1Y
-32.0 -12.8 -11.8 27.7 50.6 21.7 100.0

As the company derives about 78% of its revenue from overseas market, it will be affected by
the adverse currency fluctuation, which poses a risk to profitability in addition to the volatile raw material prices. Based on a consolidated FY14 P/E multiple of 6.75, the fair value for the company works out to Rs 157/share

SHARE HOLDING PATTERN (%)

Financial Snapshot (Consolidated)

Projections (Rs Mn) Net Sales Y-o-Y Growth % Operating Expenditure EBIDTA Y-o-Y Growth % Adjusted PAT Y-o-Y Growth % EPS Rs BVPS Rs EBITDA % NPM % ROE % PER x P/B Ratio www.fullertonsecurities.co.in FY10A 52,900 11% 44,856 8,044 11% 5,074 33% 11.0 65.1 15.2% 9.6% 16.9% FY11A 56,497 7% 47,079 9,418 17% 5,810 15% 12.6 81.1 16.7% 10.3% 15.5% FY12E 76,738 36% 63,108 13,630 45% 5,730 -1% 12.4 91.5 17.8% 7.5% 13.6% 9.0 1.2 FY13E 86,899 13% 72,799 14,100 3% 8,150 42% 17.6 106.4 16.2% 9.4% 16.6% 6.3 1.1 FY14E 98,254 13% 81,435 16,819 19% 10,756 32% 23.3 126.0 17.1% 10.9% 18.5% 4.8 0.9

1 Year Price Performance (Rel. to Sensex)

Sensex
105

UPL

90

75

60

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June 7, 2012 BUSINESS PROFILE

United Phosphorus Ltd (UPL) is the leading producer of agriculture chemicals in India and the world. The company produces crop protection products, intermediaries, specialty chemicals and other chemicals. UPL has its presence across value added agri inputs ranging from seeds to crop protection and post harvest activities. The company produces a wide range of products that includes fumigants, fungicides, insecticides, rodenticides and herbicides. The product portfolio of the company includes all those products that are required in protecting plants during its different stages of growth. UPL has an efficient R&D division which helps it to launch new products to meet the changing demand of the market. The company has 21 manufacturing facilities. Among them, 9 are in India, 4 are in France, 2 in Spain and one each in UK, Argentina, Vietnam, Netherland, Italy and China. UPL has subsidiaries across the world. UPL has its presence across value added agri inputs ranging from seeds to crop protection and post harvest activities

Revenue Breakup - FY11

32% 22% North America India Europe 25% 21% RoW

Revenue Breakup - FY12

21% 39% 22% 18% North America India Europe RoW
UPL has 21 manufacturing facilities; 9 in India, 4 in France, 2 in Spain and one each in UK, Argentina, Vietnam, Netherland, Italy and China

With around 78% of the revenues coming from the overseas market, UPL has transformed itself into truly global company through string of acquisitions and strategic alliances in recent past. Rest of the world (RoW) including Brazil contributes 39% of the revenue followed by Indian operations which contributes 22%. Europe and North America contributes 18% and 21% respectively. Over the years, UPL has been successful in increasing revenue contribution from RoW through expanding in the Brazilian and other regulated markets to reduce its dependence on the US and Europe, which are highly regulated market. It helps the company to diversify its revenue stream and reduce the cyclicality in the revenue. With 78% of the revenues from the overseas market, UPL has transformed itself into truly global company through string of acquisitions and strategic alliances

UPL

Crop Protection

Specialty Chemicals

Non-Crop Protection

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June 7, 2012 INVESTMENT RATIONALE

Global Player In July 2012, UPL has acquired 51 per cent stake in Brazilian firm DVA Agro Do Brazil (DVA Agro Brazil) for USD 150mn which is engaged in the production and marketing of crop protection products. It has a formulation plant in Brazil and is undergoing expansion. In the same year in March, the company had acquired 50% stake in yet another Brazilian company Sipcam Isagro Brazil (SIB). In our opinion, these acquisitions will give UPL the strong foothold in the Brazilian market which is one of the most important agro chemical markets in the world. This has the potential to drive the volume growth going forward in addition to the fact that it will reduce the seasonality in the business for UPL. On the back of strong global presence (78% of the revenues from overseas operations), the company is aiming 15% CAGR in the next few years. In our opinion this is certainly achievable looking at the geographical presence and the product range the company has to offer. Generics Opportunity As per industry estimates, approximately USD 5bn worth of products are going off patents in next 3-4 years. It presents a great opportunity for the company like UPL which follows a strategy of filing its own registrations globally and acquiring tail end brands of global majors in a highly regulated agro chemicals markets. We believe that UPL with its geographical presence and generics lead strategy is poised to tap this opportunity and is the only Indian play in global generics market. We also like the fact that its a high entry barrier business due to high investments and regulations. With its low cost manufacturing bases in key markets, it will be able to negotiate the competition. India Opportunity India may be highest producers in certain crops in tonnage terms but per hectare yields is no way near the potential. Off late there has been realization that India needs to double its farm output to meet the growing demand coming from increasing population as well as increasing spending power of Indian middle class. This would invariably require greater use of various inputs like quality seeds, fertilizers, pesticides etc. As per reports, India uses only ~500 grams of crop protection chemicals per hectare which is one of the lowest in the world. This has resulted in lower yields of various crops in India. This effectively means that India loses approximately 30% crops due to damages caused by insects, diseases and weeds. In our view this scenario presents a huge opportunity in the agri inputs business as government has initiated several steps in past few years to strengthen the supply side of food. Moreover, RBI data shows that the area under cash crops has increased by 30% between FY03 and FY11, which typically require greater use of crop protection chemicals. In our opinion agri inputs space in India is all set for exponential growth. CCI Penalty Recently CCI (Competition Commission of India) has imposed a penalty of Rs 2.52bn for cartelization and price manipulations of Aluminum Phosphide Tablets (APT) sale to FCI. UPL's management is confident that the company is not at fault and CCIs claims of cartelization are untenable in the Appellate Tribunal. The management indicated that its pricing for APT to FCI was lower than its pricing in domestic market. We believe this negative news is already built up in the valuation. www.fullertonsecurities.co.in
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Recent acquisitions will give UPL the strong foothold in the Brazilian market; one of the most important agro chemical markets in the world

As per industry estimates approximately USD 5bn worth of products going off patents in next 3-4 years

As per reports, India uses only ~500 grams of crop protection chemicals per hectare which is one of the lowest in the world

June 7, 2012 BUSINESS PERFORMANCE

In Q4FY12, consolidated net sales grew by 16% on Y-o-Y basis to Rs 21.3bn while PAT stood at Rs 2.26bn, registering de-growth of 3.4% on Y-o-Y basis. The revenue growth of 16% was driven by 12% volume growth, 4% price increase and exchange rate impact of 2%. UPL reported EBITDA of Rs 3.9bn, 5% growth on Y-o-Y basis which was impacted by higher employee cost. Management has guided for 15% revenue growth in FY13 with EBITDA margins of 18-20% and is confident that the domestic growth will rebound. It is also planning to launch 2- 3 new products in Indian market in upcoming quarters. In Q4FY12, consolidated net sales grew by 16% on Y-o-Y basis to Rs 21.3bn

Yearly Revenue & PAT Margin

100
Rs in bn

Quarterly Revenue & PAT Margin

12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

25000 20000

15.0% 10.0% 5.0% 0.0% Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Revenue PAT Margin

Rs in mn

75 50 25 0 FY 10 FY 11 Revenue FY12E FY13E FY14E PAT Margin

15000 10000 5000 0

EBITDA & PAT

20,000 15,000
125.0 100.0

EPS & BVPS

Management has guided for 15% revenue growth in FY13 with EBITDA margins of 18-20%

Rs in mn

10,000 5,000 0 FY 10 FY 11 EBITDA FY12E FY13E PAT FY14E

Rs

75.0 50.0 25.0 0.0 FY 10 FY 11 EPS FY12E FY13E BVPS FY14E

Peer Comparison We compare UPL with Rallis India and Bayer Cropscience, both of which has presence in the crop protection market. Rallis is a Tata Group Company and subsidiary of Tata Chemical, which has most of the business coming from India whereas Bayer Cropscience is subsidiary of German MNC Bayer. UPL has healthy EBITDA margin of 16.7% and PAT margin of 10.5%. In terms of PE and PB valuation, UPL is trading cheap compared to both Rallis India and Bayer Cropscience. In terms of PE and PB valuation, UPL is trading cheap compared to both Rallis India and Bayer Cropscience

Peer Group Comparison

Companies
UPL Rallis India Bayer Cropscience
FY11 Consolidated figures

Revenue (Rs. mn)

56,497 10,657 21,273

EBIDTA PAT Margin Margin (%) (%)

16.7% 16.4% 11.3% 10.5% 12.0% 6.3%

ROE %
16% 25% 19%

P/E (x)
8.9 18.9 24.7

P/B (x)
1.4 4.7 4.7

CMP (Rs.)
112 123 805

FV (Rs.)
2 1 10

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June 7, 2012 VALUATIONS

We expect UPLs revenue to grow at a CAGR of 13% from FY12 to FY14E to Rs 98.3bn and further estimate that PAT would grow at a CAGR of 37% in the same period to Rs 10.8bn. New product launches in Indian market (2 insecticide varieties), favorable forex scenario and Brazilian acquisitions will drive the volume growth going forward. We believe EBITDA margins would stabilize around 17% in FY14E. At current market price, the stock is trading at 4.8x based on estimated EPS of Rs 23.3 for FY14E. We value the stock at 6.75x FY14E EPS, which is 25% discount to the average of last five years two year forward PE multiple of 9. We assign the discount on valuation to factor in the muted performance in global business of the company which is impacted by changes in climatic condition and forex volatility. Based on a consolidated FY14 P/E multiple of 6.75, the fair value for the company works out to Rs 157/share. We recommend a BUY rating on the stock.
Profit & Loss Statement (Consolidated) Particulars (Rs Mn) FY10A Net Sales 52,900 Operating Expenditure 44,856 Depreciation 2,147 EBIT 5,897 EBIT Margin (%) 11% Interest Expenses 1,938 Other Income 2,028 Profit Before Tax 5,987 Less: Tax 854 Adjusted PAT 5,074 PAT Margin (%) 10% ROE (%) 17% EPS (Rs) 11.0 BVPS (Rs) 65.1 Valuation Ratios (x) PER x P/B Ratio
Ratio Analysis Particulars (Rs Mn) Current Ratio Cash Ratio Interest Coverage Ratio Debt Equity Ratio ROCE

We expect UPLs revenue to grow at a CAGR of 20% from FY12 to FY14E to Rs.98.3bn and PAT would be around Rs 10.8bn in FY14E

FY11A 56,497 47,079 2,138 7,280 13% 3,120 2,485 6,644 731 5,810 10% 16% 12.6 81.1

FY12E 76,738 63,108 2,924 10,706 14% 4,147 902 7,461 1,280 5,730 7% 14% 12.4 91.5 FY12E 9.0 1.2

FY13E 86,899 72,799 3,279 10,821 12% 2,981 2,172 10,013 1,802 8,150 9% 17% 17.6 106.4 FY13E 6.3 1.1

FY14E 98,254 81,435 3,425 13,394 14% 2,649 2,456 13,201 2,376 10,756 11% 18% 23.3 126.0 FY14E 4.8 0.9

FY10A 3.0 1.1 0.3 0.8 9%

FY11A 2.6 0.8 0.4 0.7 10%

FY12E 2.6 0.8 0.4 0.9 11%

FY13E 2.5 0.7 0.3 0.7 11%

FY14E 2.4 0.8 0.2 0.5 13%

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June 7, 2012
Balance Sheet (Consolidated) Particulars (Rs Mn) Application of Funds Fixed Asset (Net) CWIP Investments Inventories Sundry Debtors Cash & Bank Balance Loans & Advances Miscellaneous Expenditure not W/O Total Sources of Funds Share Capital Reserves & Surplus Minority Interest Total Debt Net Deferred Tax Current Liabilities Provisions Total Cash Flow Statement (Consolidated) Particulars (Rs Mn) Profit Before Tax Total Adjustments Change in Working Capital Direct Taxes Paid Others Cash Flow from Operations FY10A 17,723 406 7,612 10,084 12,135 15,778 5,207 0 68,943 FY11A 23,209 658 8,232 14,055 14,795 15,659 5,406 0 82,013 FY12E 34,785 658 7,834 16,859 18,849 18,152 5,406 0 102,542 FY13E 34,806 658 7,834 19,092 21,345 19,499 5,406 0 108,639 FY14E 34,181 658 7,834 21,586 24,666 24,194 5,406 0 118,524

879 29,039 140 24,193 115 13,413 1,164 68,943

924 36,337 180 25,293 (78) 18,117 1,241 82,013

924 41,114 233 37,264 (78) 21,907 1,179 102,542

924 47,908 294 33,111 (78) 24,812 1,669 108,639

924 56,900 363 29,290 (78) 29,197 1,929 118,524

FY10A 6,254 3,778 4,024 (853) 0 13,203 (2,315) 30 2,482 (2,432) 0 0 2,850 0 0 0 (667) (1,844) (225) 114 10,884 5,539 16,423

FY11A 6,784 4,273 (1,884) (885) 0 8,288 (7,108) 147 (448) (9,133) 0 0 2,888 0 0 0 (944) (1,095) (1,016) (167) (1,012) 16,178 15,166

FY12E 7,461 7,070 (3,130) (1,280) 0 10,122 (14,500) 0 0 (14,500) 0 0 14,500 0 (2,529) 0 (953) (4,147) 0 6,871 2,493 15,659 18,152

FY13E 10,013 6,260 (1,333) (1,802) 0 13,137 (3,300) 0 0 (3,300) 0 0 3,300 0 (7,453) 0 (1,356) (2,981) 0 (8,489) 1,347 18,152 19,499
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FY14E 13,201 6,074 (1,170) (2,376) 0 15,729 (2,800) 0 0 (2,800) 0 0 2,800 1 (6,622) 0 (1,764) (2,649) 0 (8,234) 4,695 19,499 24,194

Net Investment in GFA Sale of Fixed Assets Others Cash Flow from Investment Proceeds from Issue of shares Proceed from Issue of Debentures Proceed from LT Borrowings Proceed from ST Borrowings Repayment of f the L T Borrowings Repayment of f the S T Borrowings Dividend Paid Interest Paid Others Cash Flow from Financing Net Cash Flows Op bal of cash Transferred to B/S

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June 7, 2012
Board Of Directors Director Name Current Position Description

Rajju Shroff

Mr. Rajju D. Shroff is the Director of United Phosphorus Limited since 1 October, 1992. He is also the Chairman and Managing Director of the Company. He has been associated with the group since inception. He has extensive experience in the chemical industry and has been closely involved with the Research and Development of all the Groups products. His technical expertise was instrumental in United Phosphorus Limited winning the Governments Gold Shield Award. He has held various important positions in commercial, Chairman of the Board, Managing Director educational and social fields. He is also a Director on the Board of various other public limited companies, viz. Uniphos Enterprises Limited, Uniphos Agro Industries Limited, Enviro Technology Limited, Nivi Trading Limited, Shroff United Chemicals Limited, SWAL Corporation Limited, Pradeep Metals Limited, Bharuch Enviro Infrastructure Limited, Agri Net Solutions Limited, Vapi Effluent & Waste Management Co. Limited, Search Enviro Limited, Uniphos Enviro Limited and JRF Biogenomics Limited.

Sandra Shroff

Mrs. Sandra R. Shroff is Non-Executive Vice Chairman of the Board of United Phosphorus Limited She is the Director of the Company since 1st October, 1992. She has been associated with Uniphos Enterprises Ltd. (erstwhile United Phosphorus Ltd.) since its inception. Non-Executive Vice Chairman of the Board She has held various important positions in commercial, educational and social fields. She is on the Board of Uniphos Enterprises Ltd., Uniphos Agro Industries Ltd., Enviro Technology Ltd., Nivi Trading Ltd., Shroff United Chemicals Ltd., Bharuch Enviro Infrastructure Ltd., Vapi Waste and Effluent Management Co. Ltd., Ventura Guaranty Ltd. and UPL Environmental Engineers Ltd.

Jaidev Shroff

Global CEO of the Group, Director

Mr. Jaidev R. Shroff is Global CEO of the Group, Director of United Phosphorus Ltd. He is is the Director of the Company since 1st October, 1992 and is a science graduate. He has worked with the Group for more than 18 years. He has substantial experience in various areas of the Groups operations. He is also a Director on the Board of various other public limited companies

A. Ashar

Director - Finance, Whole-time Director

Mr. Arun C. Ashar is Director - Finance, Whole-time Director of United Phosphorus Limited since March, 1993. He is a Chartered Accountant. He was associated with the group in the capacity of consultant prior to his joining of the Board. He.Iooks after the financial functions of the Company and has been instrumental in raising finance for various projects of the Company.

Kalyan Banerjee

Whole Time Director

Mr. Kalyan M. Banerjee is Whole Time Director of the United Phosphorus Ltd since 21 October, 2003. He is a Chemical Engineer. He has been associated with the Uniphos Enterprises Limited (erstwhile United Phosphorus Limited) since its, inception. He has held various important positions in commercial, educational and social fields. He has been the Director of Rotary International and is activeFy associated with all the Rotary projects

Vikram Shroff

Executive Director

Mr. Vikram R. Shroff is Executive Director of United Phosphorus Limited . He is Science graduate from University of Mumbai. He has been associated with the group since 1997. He looks after HR functions, Purchase, Commercial, Marketing (IocI), production departments and SAP implementation in the organization. He is onthe Board of Bharuch Enviro Infrastructure Ltd. and Agrinet Solutions ltd.

Chirayu Amin

Independent Non-Executive Director

Mr. Chirayu R. Amin is Independent Non-Executive Director of United Phosphorus Limited. He is a Science graduate and Master in Business Administration. Presently, he is the Chairman nd Managing Director of Alembic Limited. He represented the industry in various associations and federations such as FICCI, International Chambers of Commerce, Federation of Gujarat Industries etc. He is keenly interested in sports and presently he is the Vice-President of Cricket Control Board of India. He has many years of experience in business. He is also Chairman of Alembic Glass Industries Ltd. and Paushak Ltd.

Pradeep Goyal

Independent Non-Executive Director

Mr. Pradeep Goyal is Independent Non-Executive Director of United Phosphorus Limited since 31 january, 2002. He is a Metallurgy Engineer from IIT and Master Graduate from MIT, USA. He has been the member of various associations such as All India Manufacturers Organisation, ASSOCHAM, Indo-German Chambers of Commerce, etc.

P. Krishna

Independent Non-Executive Director

Dr. P. V. Krishna is Independent Non-Executive Director of United Phosphorus Ltd since 31 January, 2002. He is a member of the Audit Committee, Shareholders/Investors Grievance Committee and Remuneration Committee. He is Ph.D.(Tech.). He is a Chemical technologist with specialization in chemicals and petrochemicals. He has over 40 years experience in Research & Development and industry and held various positions in Government of Gujarat and Government of India.

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