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MOSL: Morning India (28/February/18): 1. UPL (Initiating Coverage): Reaping growth; 2. Auto Sales Estimate

MOrning India (28/February/18): 1. UPL (Initiating Coverage): Reaping growth; 2. Auto Sales Estimate

Today’s top research idea

• UPL (Initiating Coverage): Reaping growth; Generic pesticides, backward integration to drive profitability
  A multitude of products going off-patent would unleash a generics opportunity of ~USD3b over CY17-20. With strong R&D and integrated manufacturing facilities, UPL is in a sweet spot to grab the impending opportunity in the generics market.
• The company is also set to benefit from the increasing phenomenon of pest resistance across crops with its broad array of products, which enables it to launch new combinations to tackle resistance.
  Pest resistance to major agrochemical ‘glyphosate’ (market size of ~USD5b) could provide UPL with its next key growth driver – its variant, ‘gluphosinate’.
• We expect UPL to clock ~12% revenue CAGR and ~14% PAT CAGR over FY18-20 and value the company at 17x FY20E EPS of INR55.6, arriving at a TP of INR945. Initiate coverage with Buy.

 

Piping hot news

Nirav Modi's Firestar Diamond files for bankruptcy as PNB fraud hits $2 bn

• The international jewelry business that's part of the empire controlled by Nirav Modi, a billionaire accused of masterminding India’s biggest bank fraud, has filed for bankruptcy in the US just as the Indian lender at the heart of the scam revised up its fraud estimate. Firestar Diamond Inc blamed liquidity and supply chain challenges and listed up to $100 million in assets and debt, according to Chapter 11 documents filed Monday in a bankruptcy court in New York.