MOSL: UPL (Buy)-Growth momentum intact-LATAM pulls up an otherwise moderate performance

UPL: Growth momentum intact; LATAM pulls up an otherwise moderate performance

 (UPLL IN, Mkt Cap USD4.3b, CMP INR622, TP INR749, 20% Upside, Buy)

• In-line quarter; operational performance improves: UPLL’s revenue increased 12.9% YoY to INR42.6b (our estimate: INR42.3b) in 2QFY19, driven by volume growth of 8% and price growth of 4%. EBITDA increased 17% YoY to INR8,390m (our estimate: INR8,324m) in the quarter, with the margin expanding 60bp YoY to 19.7% (in-line). Consequently, adj. PAT increased 7.8% YoY to INR3,580m (our estimate: INR3,686m). For 1HFY19, revenue grew 12% YoY, EBITDA increased 15% YoY (margin up 50bp to 20.1%) and adj. PAT rose 10% YoY. We expect the momentum to continue in 2HFY19, with revenue growth of 12% YoY and margin expansion of 80bp YoY. 
• Strong growth in LATAM; outlook positive: LATAM business delivered robust growth of 25.8%, driven by good traction in all key countries (except Argentina, where the economic situation played a spoilsport). LATAM is an important geography for UPPL accounting for 41% of overall revenue (v/s 37% in 2QFY18). Management expects the second half to be equally strong; the farming community, too, is upbeat, given the exports opportunity emerging from the tense trade ties between the US and China. Management has maintained its growth (10-12%) and margins guidance on account of the holistic growth prospects across geographies.