MOSL: UPL (Downgrade to Neutral)-Arysta acquisition completed – earnings momentum intact-Valuations fair and leverage rises
UPL: Arysta acquisition completed – earnings momentum intact; Valuations fair and leverage rises; Downgrade to Neutral
(UPLL IN, Mkt Cap USD7.4b, CMP INR1017, TP INR1067, 5% Upside, Downgrade to Neutral)
- In-line operational performance: UPLL's (ex-Arysta) revenue increased 15.2% YoY (7% by volume, 5% by price and 3% by FX) to INR65.6b (our estimate: INR65.6b) in 4QFY19. EBITDA grew 17.7% YoY to INR14.3b (our 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 (for two months, i.e. Feb-Mar'19), consol. revenue stands at INR85.3b for 4QFY19 (INR218.4b in FY19), with a margin of 16.5% (18.8% in FY19). PAT came in at INR2.1b (INR22.1b in FY19), impacted by multiple acquisition-related costs and the purchase price allocation impact. Management has guided for combined entity pro forma revenue of INR325b and EBITDA of INR69b in FY19, taking the full-year financials of Arysta into account. Revenue and EBITDA growth guidance for FY20 on this annualized base stands at 8-10% and 16-20%, respectively.
UPL is a global producer of crop protection products, intermediates, specialty chemicals and other industrial chemicals based in India. Co. offers a range of products that includes insecticides, Fungicides, Herbicides, Fumigants, PGR and Rodenticides. Co. manufactures and markets Caustic Chlorine, White Phosphorus, Industrial Chemicals, Specialty Chemicals and is engaged in Captive Power Generation of 48.5 MW. Co. maintains a range of generic agrochemical and other chemical intermediates which are exported to more than 100 countries in the world.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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