UPL Ltd. share price target

estimate: INR14.4b), with the margin expanding 50bp YoY to 21.9% (our estimate: 22%). Adj. PAT grew 39.5% YoY to INR10.7b in the quarter. Other income came in lower at INR590m (v/s INR1,180m in 4QFY18), but the impact was more than offset by a lower tax rate (2.8% v/s 17.7% in 4QFY18) and a decline in finance cost (INR2.6b v/s INR4.1b in 4QFY18). For FY19, revenue grew 14% to INR198.7b, with the margin expanding 60bp to 20.8%. Adj. PAT increased 17% to INR26.1b. Key highlights of Arysta consolidation: On incorporating Arysta's financials...

In line performance. Arysta's acquisition A strategic fit. UPL's 4QFY19 performance (excluding Arysta Lifescience's two months results) was largely in line with our estimates. The sales/EBITDA/Adj. PAT grew 15.2/0.9/23.5% YoY to ` 65.5/14.3/9.0bn, respectively. The adj.PAT growth of 23.5% YoY was primarily due to a decline in interest costs (down 59.3% YoY) and a lower tax rate (2.6% in 4QFY19 against 23.1% in 4QFY18). Sales rose 15.2% YoY, driven by a volume/value/exchange rate growth of 7.0/5.0/3.0% YoY, respectively. The 4QFY19 and FY19 results include the...

UPLL's revenue and EBITDA numbers (excluding Arysta's acquisition related Change in Estimates | Target | Reco adjustments) were largely in line with our estimates. It reported revenue of INR 85 bn in 4Q'19 vis--vis our estimate of INR 90 bn (UPL Group- INR 66 bn,...

PAT grew 6% YoY to INR15,510m. Growth was robust across key geographies (+36.6% YoY in Europe, +26.5% YoY in LATAM, +21.5% YoY in North America and +12.7% YoY in RoW), barring India (-20.8% YoY), where poor Kharif yield and erratic rainfall resulted in stressed cash flow for farmers. UPLL also faced restriction on the sale of organophosphorus products in a few states in India, which impacted the top line (to the tune of INR300-400m on an annualized basis). UPLLs performance in Europe has been a highlight, with the geography growing at 15.4% YoY in 9MFY19 against an estimated industry decline of 10% in CY18. We maintain our estimates (revenue/PAT CAGR of 32%/18% over FY18-21), factoring in the financials of Arysta in FY20E and FY21E. We roll over the target price to FY21E EPS, valuing UPLL at 13x (~15% discount to its three-year average trading multiple, primarily due to the expectedly high leverage in the balance sheet post Arysta acquisition).

The EU has passed a regulation (effective from Jan'19) to minimize the use of copper in crop protection products. The new regulation states that the permissible use of phy to sanitary products (pesticides, nematicides and rodenticides) containing copper compounds should be curbed. In this report, we analyze details of the regulation and its impact from UPLL's point of view.

LATAM drives revenue growth; steady volume growth Revenue rose by 13% YoY in Q2FY19 led by strong performance in India and LATAM businesses (contributing around 66% of total sales). LATAM business registered a strong revenue growth of 26% YoY in Q2FY19 led by decent growth across geographies in the region especially Brazil barring Argentina which was impacted by currency depreciation and overall economic situation. LATAM's revenue contribution has increased to 41% during the quarter from 37% in Q2FY18. Management expects strong performance to continue in LATAM in H2FY19 as well led by advance orders received in Brazil. Going ahead, we expect LATAM revenue to grow at a CAGR of 13% over FY18-20E on the back of strong...

Scales higher in the top five league globally: With Arysta's acquisition, UPL moves ahead in the global agri-chemical ranking and is now among the top five players. The acquisition is expected to provide significant benefits to UPL, as it complements UPL in many areas. Arysta is an asset-light company and a global provider of innovative crop-protection solutions, including...

Scales higher in the top five league globally: With Arysta's acquisition, UPL moves ahead in the global agri-chemical ranking and is now among the top five players. The acquisition is expected to provide significant benefits to UPL, as it complements UPL in many areas. Arysta is an asset-light company and a global provider of innovative crop-protection solutions, including...

In Brazil, UPLL primarily engages in soybean and maize (together account for 63% of the countrys total plantation area) and Arysta in sugarcane and cotton (19% of the countrys total plantation area). Moreover, UPLL has a strong presence in fungicides, while Arysta has a robust platform of bio solutions (#2 globally in bio stimulants) and seed treatment in Brazil. Brazilian farmers are enjoying strong demand for soybean, primarily due to the tense ties between the US and China. According to industry sources, China accounts for more than 60% of the soybean traded worldwide. This apart, Brazils producers are selling soybean at a premium soybean that were to be loaded in August fetched USD2.21/bushel more than Chicago futures as on July first week the widest gap since 2014. Where Unizeb Gold (brand of mancozeb) is sold at ~USD4 per unit in Brazil, Tridium fetches a realization of USD8-10 per unit.

We maintain Buy with a TP of Rs 719 (9x Sept'20 EV/EBITDA). UPL reported Sales/EBITDA/APAT growth of 12.9/16.2/18.4% to Rs 42.57bn/Rs 7.87bn/Rs 2.85bn respectively. PAT was weighed down by a higher tax rate (26.6% against 17.5% in 2QFY18) due to derivation of higher profits from India (attracting a higher tax rate).