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United Phosphorus Ltd (UPL) is the leading producer of agriculture chemicals in India and the world. The
mpany produces crop protection products, intermediaries, specialty chemicals and other chemicals. UPL has its
sence 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
d herbicides. The product portfolio of the company includes all those products that are required in protecting plants
ing its different stages of growth. UPL has an efficient R&D division which helps it to launch new products to meet the
nging 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
h in UK, Argentina, Vietnam, Netherland, Italy and China. UPL has subsidiaries across the world.
USINESS PROFILE
UPL has its presence value added agri ranging from seeds tprotection and post activities
UPL has 21 manufafacilities; 9 in India, 4 in 2 in Spain and one eachArgentina, VNetherland, Italy and Ch
With 78% of the revenuthe overseas market, Utransformed itself intglobal company tstring of acquisitionstrategic alliances
22%
25%21%
32%
Revenue Breakup - FY11
North America
India
Europe
RoW
21%
22%
18%
39%
Revenue Breakup - FY12
North America
India
Europe
RoW
UPL
Crop Protection Specialty Chemicals Non-Crop Protection
With around 78% of the revenues coming from the overseas market, UPL has transformed itself into truly global
mpany through string of acquisitions and strategic alliances in recent past. Rest of the world (RoW) including Brazil
tributes 39% of the revenue followed by Indian operations which contributes 22%. Europe and North America
tributes 18% and 21% respectively.
Over the years, UPL has been successful in increasing revenue contribution from RoW through expanding in the
zilian and other regulated markets to reduce its dependence on the US and Europe, which are highly regulated market.
elps the company to diversify its revenue stream and reduce the cyclicality in the revenue.
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VESTMENT RATIONALEbal Player
In July 2012, UPL has acquired 51 per cent stake in Brazilian firm DVA Agro Do Brazil(DVA Agro Brazil) for USD 150mn
ch is engaged in the production and marketing of crop protection products. It has a formulation plant in Brazil and is
ergoing expansion. In the same year in March, the company had acquired 50% stake in yet another Brazilian company
am Isagro Brazil(SIB).
In our opinion, these acquisitions will give UPL the strong foothold in the Brazilian market which is one of the most
ortant agro chemical markets in the world. This has the potential to drive the volume growth going forward in addition to
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%
GR in the next few years. In our opinion this is certainly achievable looking at the geographical presence and the product
ge the company has to offer.
erics Opportunity
As per industry estimates, approximately USD 5bn worth of products are going off patents in next 3-4 years. It
ents a great opportunity for the company like UPL which follows a strategy of filing its own registrations globally and
uiring 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
only Indian play in global generics market. We also like the fact that its a high entry barrier business due to high
stments and regulations. With its low cost manufacturing bases in key markets, it will be able to negotiate the competition.
a Opportunity
India may be highest producers in certain crops in tonnage terms but per hectare yields is no way near the potential.
late there has been realization that India needs to double its farm output to meet the growing demand coming from
easing population as well as increasing spending power of Indian middle class. This would invariably require greater use of
ous 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
ld. This has resulted in lower yields of various crops in India. This effectively means that India loses approximately 30% crops
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
s in past few years to strengthen the supply side of food. Moreover, RBI data shows that the area under cash crops has
eased by 30% between FY03 and FY11, which typically require greater use of crop protection chemicals. In our opinion agri
uts space in India is all set for exponential growth.
Penalty
Recently CCI (Competition Commission of India) has imposed a penalty of Rs 2.52bn for cartelization and price
nipulations of Aluminum Phosphide Tablets (APT) sale to FCI. UPL's management is confident that the company is not at
t and CCIs claims of cartelization are untenable in the Appellate Tribunal. The management indicated that its pricing for
to FCI was lower than its pricing in domestic market. We believe this negative news is already built up in the valuation.
Recent acquisitiongive UPL the foothold in the Bmarket; one of thimportant agro cmarkets in the worl
As per industry esapproximately USworth of productsoff patents in neyears
As per reports, Indonly ~500 grams protection chemichectare which is onlowest in the world
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USINESS 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
-growth of 3.4% on Y-o-Y basis. The revenue growth of 16% was driven by 12% volume growth, 4% price increase and
change 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.
nagement has guided for 15% revenue growth in FY13 with EBITDA margins of 18-20% and is confident that the domestic
owth will rebound. It is also planning to launch 2- 3 new products in Indian market in upcoming quarters.
In Q4FY12, consolnet sales grew by 1Y-o-Y basis to Rs 21
Management has gfor 15% revenue gin FY13 with Emargins of 18-20%
In terms of PE anvaluation, UPL is trcheap compared toRallis India and Cropscience
er ComparisonWe compare UPL with Rallis India and Bayer Cropscience, both of which has presence in the crop protection
rket. Rallis is a Tata Group Company and subsidiary of Tata Chemical, which has most of the business coming from India
ereas Bayer Cropscience is subsidiary of German MNC Bayer. UPL has healthy EBITDA margin of 16.7% and PAT margin of
5%. In terms of PE and PB valuation, UPL is trading cheap compared to both Rallis India and Bayer Cropscience.
er Group Comparison
mpaniesRevenue
(Rs. mn)
EBIDTA
Margin (%)
PAT Margin
(%)ROE %
P/E
(x)
P/B
(x)
CMP
(Rs.)
FV
(Rs.)
56,497 16.7% 10.5% 16% 8.9 1.4 112 2
s India 10,657 16.4% 12.0% 25% 18.9 4.7 123 1
er Cropscience 21,273 11.3% 6.3% 19% 24.7 4.7 805 1011 Consolidated figures
0.0%
2.0%4.0%
6.0%
8.0%
10.0%
12.0%
0
25
50
75
100
FY 10 FY 11 FY12E FY13E FY14E
Yearly Revenue & PAT Margin
Revenue PAT Margin
0.0%
5.0%
10.0%
15.0%
0
5000
10000
15000
20000
25000
Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12
R
sinmn
Quarterly Revenue & PAT Margin
Revenue PAT Margin
0.0
25.0
50.0
75.0
100.0
125.0
FY 10 FY 11 FY12E FY13E FY14E
Rs
EPS & BVPS
EPS BVPS
0
5,000
10,000
15,000
20,000
FY 10 FY 11 FY12E FY13E FY14E
EBITDA & PAT
EBITDA PAT
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ALUATIONSWe expect UPLs revenue to grow at a CAGR of 13% from FY12 to FY14E to Rs 98.3bn and further estimate that
would grow at a CAGR of 37% in the same period to Rs 10.8bn. New product launches in Indian market (2 insecticide
eties), favorable forex scenario and Brazilian acquisitions will drive the volume growth going forward. We believe EBITDA
gins 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
k at 6.75x FY14E EPS, which is 25% discount to the average of last five years two year forward PE multiple of 9. We
gn the discount on valuation to factor in the muted performance in global business of the company which is impacted
hanges 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
/share. We recommend a BUY rating on the stock.
We expect UPLs revegrow at a CAGR offrom FY12 to FY1Rs.98.3bn and PAT be around Rs 10.8FY14E
Profit & Loss Statement (Consolidated)
Particulars (Rs Mn) FY10A FY11A FY12E FY13E FY14E
Net Sales 52,900 56,497 76,738 86,899 98,254
Operating Expenditure 44,856 47,079 63,108 72,799 81,435
Depreciation 2,147 2,138 2,924 3,279 3,425
EBIT 5,897 7,280 10,706 10,821 13,394
EBIT Margin (%) 11% 13% 14% 12% 14%
Interest Expenses 1,938 3,120 4,147 2,981 2,649
Other Income 2,028 2,485 902 2,172 2,456
Profit Before Tax 5,987 6,644 7,461 10,013 13,201
Less: Tax 854 731 1,280 1,802 2,376
Adjusted PAT 5,074 5,810 5,730 8,150 10,756
PAT Margin (%) 10% 10% 7% 9% 11%
ROE (%) 17% 16% 14% 17% 18%
EPS (Rs) 11.0 12.6 12.4 17.6 23.3
BVPS (Rs) 65.1 81.1 91.5 106.4 126.0
Valuation Ratios (x) FY12E FY13E FY14E
PER x 9.0 6.3 4.8
P/B Ratio 1.2 1.1 0.9
Ratio Analysis
Particulars (Rs Mn) FY10A FY11A FY12E FY13E FY14E
Current Ratio 3.0 2.6 2.6 2.5 2.4
Cash Ratio 1.1 0.8 0.8 0.7 0.8
Interest Coverage Ratio 0.3 0.4 0.4 0.3 0.2
Debt Equity Ratio 0.8 0.7 0.9 0.7 0.5
ROCE 9% 10% 11% 11% 13%
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Balance Sheet (Consolidated)
Particulars (Rs Mn) FY10A FY11A FY12E FY13E FY14E
Application of Funds
Fixed Asset (Net) 17,723 23,209 34,785 34,806 34,181CWIP 406 658 658 658 658
Investments 7,612 8,232 7,834 7,834 7,834
Inventories 10,084 14,055 16,859 19,092 21,586
Sundry Debtors 12,135 14,795 18,849 21,345 24,666
Cash & Bank Balance 15,778 15,659 18,152 19,499 24,194
Loans & Advances 5,207 5,406 5,406 5,406 5,406
Miscellaneous Expenditure not W/O 0 0 0 0 0
Total 68,943 82,013 102,542 108,639 118,524
Sources of Funds
Share Capital 879 924 924 924 924
Reserves & Surplus 29,039 36,337 41,114 47,908 56,900
Minority Interest 140 180 233 294 363
Total Debt 24,193 25,293 37,264 33,111 29,290Net Deferred Tax 115 (78) (78) (78) (78)
Current Liabilities 13,413 18,117 21,907 24,812 29,197
Provisions 1,164 1,241 1,179 1,669 1,929
Total 68,943 82,013 102,542 108,639 118,524
Cash Flow Statement (Consolidated)
Particulars (Rs Mn) FY10A FY11A FY12E FY13E FY14E
Profit Before Tax 6,254 6,784 7,461 10,013 13,201
Total Adjustments 3,778 4,273 7,070 6,260 6,074
Change in Working Capital 4,024 (1,884) (3,130) (1,333) (1,170)
Direct Taxes Paid (853) (885) (1,280) (1,802) (2,376)
Others 0 0 0 0 0
Cash Flow from Operations 13,203 8,288 10,122 13,137 15,729
Net Investment in GFA (2,315) (7,108) (14,500) (3,300) (2,800)
Sale of Fixed Assets 30 147 0 0 0
Others 2,482 (448) 0 0 0
Cash Flow from Investment (2,432) (9,133) (14,500) (3,300) (2,800)
Proceeds from Issue of shares 0 0 0 0 0
Proceed from Issue of Debentures 0 0 0 0 0
Proceed from LT Borrowings 2,850 2,888 14,500 3,300 2,800
Proceed from ST Borrowings 0 0 0 0 1
Repayment of f the L T Borrowings 0 0 (2,529) (7,453) (6,622)
Repayment of f the S T Borrowings 0 0 0 0 0
Dividend Paid (667) (944) (953) (1,356) (1,764)
Interest Paid (1,844) (1,095) (4,147) (2,981) (2,649)Others (225) (1,016) 0 0 0
Cash Flow from Financing 114 (167) 6,871 (8,489) (8,234)
Net Cash Flows 10,884 (1,012) 2,493 1,347 4,695
Op bal of cash 5,539 16,178 15,659 18,152 19,499
Transferred to B/S 16,423 15,166 18,152 19,499 24,194
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Director Name Current Position Description
Rajju Shroff Chairman of the Board, Managing Director
Mr. Rajju D. Shroff is the Director of United Phosphorus Limited since 1 October, 1992. He is also the Chairman and Manag
of the Company. He has been associated with the group since incepti on. He has extensive experience in the chemical i nd
has been closely involved with the Research and Development of all the Groups products. Hi s technical expertise was inst
in United Phosphorus Limited winning the Governments Gold Shield Award. He has held various important positions in co
educational and social fields. He is al so a Director on the Board of various other public limited companies, viz. Uniphos Ent
Limited, Uniphos Agro Industries Limited, Enviro Technology Limited, Nivi Trading Limited, Shroff United Chemicals Limite
Corporation Limited, Pradeep Metals Limited, Bharuch Enviro Infrastructure Limited, Agri Net Solutions Limited, Vapi Efflu
Management Co. Limited, Search Enviro Limited, Uniphos Enviro Limited and JRF Biogenomics Limited.
Sandra Shroff Non-Exec utive Vice Chairman of the Board
Mrs. Sandra R. Shroff is Non-Executive Vice Chairman of the Board of United Phosphorus Limited She is the Director of the
since 1st October, 1992. She has been associated with Uniphos Enterprises Ltd. (erstwhile United Phosphorus Ltd.) since it
She has held various important positions in commercial, educational and social fields. She is on the Board of Uniphos Ente
Uniphos Agro Industries Ltd., Enviro Technology Ltd., Nivi Trading Ltd., Shroff United Chemicals Ltd., Bharuch Enviro I nfras
Ltd., Vapi Waste and Effluent Management Co. Ltd., Ventura Guaranty Ltd. and UPL Environmental Engineers Ltd.
Jaidev Shroff Global CEO of the Group, DirectorMr. Jaidev R. Shroff is Global CEO of the Group, Director of United Phosphorus Ltd. He is is the Director of the Company sinOctober, 1992 and is a science graduate. He has worked with the Group for more than 18 years. He has substantial experie
various areas of the Groups operations. He is also a Director on the Board of various other public limi ted 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 Chart
Accountant. He was associated with the group in the capacity of consultant prior to his joining of the Board. He.Iooks after
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 Engi
has been associated with the Uniphos Enterprises Limited (erstwhile United Phosphorus Limited) since its, inception. He h
various important positions in commercial, educational and social fi elds. He has been the Director of Rotary International a
activeFy associated with all the Rotary projects
Vikram Shroff Executive Director
Mr. Vikram R. Shroff is Executive Director of United Phosphorus Limited . He is Sci ence graduate from University of Mumba
been associated with the group since 1997. He looks after HR functions, Purchase, Commercial, Marketing (IocI), productio
departments and SAP implementation in the o rganization. He is onthe Board of Bharuch Enviro Infrastructure Ltd. and Ag
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 M
Business Administration. Presently, he is the Chairman nd Managing Director of Alembic Limited. He represented the indu
various associations and federations such as FICCI, International Chambers of Commerce, Federation of Gujarat Industries
keenly interested in sports and presently he is the Vice-President of Cricket Control Board of India. He has many years of ex
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 Me
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 o
Committee, Shareholders/Investors Grievance Committee and Remuneration Committee. He is Ph.D.(Tech.). He is a Chem
technologist with specialization in chemicals and petrochemicals. He has over 40 years experience in Research & Develop
industry and held various positions in Government of Gujarat and Government of India.
Board Of Directors
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