MOSL: UPL (Neutral)-LATAM, India drive revenue growth
UPL: LATAM, India drive revenue growth
(UPLL IN, Mkt Cap USD5.8b, CMP INR543, TP INR613, 13% Upside, Neutral)
EBITDA/PAT above estimate
- Revenue growth in 3QFY20 was led by LATAM, while the EBITDA performance was driven by synergy benefits from the Arysta acquisition.
- EBITDA/PAT for the quarter exceeded our estimate by 15%/47%. We thus increase our EBITDA/PAT estimate by 7%/25% for FY20, but largely maintain it for FY21/22.
- Gross debt has increased sequentially and also over 9MFY20, which is a cause for concern. As a result, we maintain our Neutral stance on the stock.
LATAM continues leading growth; Europe/North America drag
- UPLL’s (including Arysta) revenue increased 81% YoY to INR88.9b (our estimate: INR89.8b) in 3QFY20. However, on like-to-like basis (i.e. incl. Arysta in 3QFY19), revenue was up 7% YoY (volume growth: 10%, price: -1% and exchange gain: -2%).
- Reported EBITDA increased 2x YoY to INR20.7b (our estimate: INR18b). LTL EBITDA was up 22% YoY. Adj. PAT grew 35% YoY to INR8.2b (our estimate: INR5.6b). For 9MFY20, LTL revenue/EBITDA grew 8%/16% YoY.
- LATAM revenue increased 21% YoY in 3QFY20 – the sixth consecutive quarter of 20%+ YoY growth. India grew 42% due to favorable weather and water conditions in Rabi, new launches, and high-value herbicide.
- However, North America (NA) and Europe revenue declined 12% and 27% YoY, respectively, due to tough weather condition in West Europe.
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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