United Phosphorous posted a good set of numbers in Q4 FY11. Their net sales stood at 1,856 cr, up 22% and net profits stood at 216 cr, up 16%. If you look at complete FY11 picture, nothing looks interesting as net sales grew by just 6% and net profits by 6% as well. This is pretty much why the stock did not go anywhere in FY11, infact from 180+ levels, it has fallen to around 150 now.

United Phosphorous posted an EPS of 12.1 in FY11 and the current P/E stands at 12.89 which is quite fair. The interesting thing comes in FY12 when they are expected to grow their sales at around 15% mark and net profits are expected to surge at over 40%. Q4 FY11 results were already way above expectations and so we are confident that United Phosphorous will lift up expectations going forward in FY12 as well. The expected EPS of FY12 is coming around 17.5 and the expected one year forward P/E comes to 8.91.

This is an interesting set of expected valuations for United Phosphorous and thus I feel it forms a good investment at current levels. Going forward in FY12, UP should definitely outperform and give good returns. I can value this stock at 12x FY12 earnings which comes to about 210.

Buy United Phosphorous(cmp:156) with a target price of 210 from a 12 months perspective.

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