Prabhudas Lilladher’s research report on UPL
UPLL’s solid 17.3% topline growth was driven almost equally by volume (+6%), Price hikes (+7%) and positive impact of exchange rates (+5%). Geographically, LatAM (+27%), Europe (+37%) and North America (+22%) aided growth. Price hikes and firm control over costs led to EBITDA margin expansion of 90 bps YoY to 20.6%. Robust performance of the core business (PBT before exceptional and forex loss was up 10.7% YoY; PLe- +1.2%) was marginally dragged by Rs 1.7 bn worth of exceptional items & forex loss. On completion of acquisition of Arysta Lifescience, UPLL also unveiled its new purpose i.e. “OpenAg” which stands for creating open minded and win-win partnerships. Arysta’s overall setup compliments UPLL in all aspects and will thereby create significant synergies on both revenue and cost front. Size is unlikely to hinder growth for UPLL in a significant way even post acquisition. It is targeting revenue of US$ 7 bn (~US$ 4.5-4.7 bn currently) and 10% market share by 2022. While UPLL will consolidate financials of February and March in its Q4 & FY19 financials, we are not doing the same due to unavailability of specific cost items of Arysta.
We expect UPL to clock topline and bottomline growth of 32.8% and 34.7% between FY18-21E. Maintain Buy rating with price target of Rs 975 based on 8x FY21 EV/EBITDA on post-Arysta financials (Target multiple is inline with what the innovators/ global agrochemical companies are garnering globally).
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