MOSL: UPL (Buy)-Set to play in the big league-More support from strong prospects for key agrochem markets

UPL: Set to play in the big league; More support from strong prospects for key agrochem markets

(UPLL IN, Mkt Cap USD5.5b, CMP INR769, TP INR924, 20% Upside, Buy)

We met UPLL’s management to cognize the narrative around the company’s strategy to emerge as a better player with an improved product basket. We also attempted to understand how the key LATAM and Europe markets (together account for ~47% of the global agrochemical markets) are shaping up in terms of opportunities. Key highlights:

• UPPL – as expected – is well poised to benefit from the attractive prospects in LATAM. Even more encouragingly, we expect a surprising performance in Europe, which should emerge as a major growth driver over the medium term, especially post the Arysta LifeScience amalgamation.
• Among the major crops in the aforementioned geographies, soybean (predominant in LATAM) and wheat (predominant in Europe) have the highest opportunity size of USD8.2b and USD8.7b, respectively.
• In a sweet spot post Arysta amalgamation: We note that both UPLL and Arysta complement each other well in terms of their crop portfolio and geographical presence. In Brazil, UPLL primarily engages in soybean and maize (together account for 63% of the country’s total plantation area) and Arysta in sugarcane and cotton (19% of the country’s 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. The combined entity, thus, would become the fifth largest agrochemicals player in Brazil, with ~10% market share (v/s UPLL’s current market share of 4.5%).