MOSL: UPL (Neutral)-Yet another quarter of strong performance by LATAM
UPL: Yet another quarter of strong performance by LATAM
(UPLL IN, Mkt Cap USD6.2b, CMP INR580, TP INR553, 5% Downside, Neutral)
- Lower-than-expected operating performance: UPLL (including Arysta) reported overall revenue of INR78.2b (v/s est. INR76.3b) in 2QFY20, up 84% YoY. However, on like-to-like basis (including Arysta in 2QFY19), revenue grew 11% YoY (volume growth: 15%, price: -1%; exchange: -3%). Reported EBITDA stood at INR15.4b (v/s est. INR18.1b; +11% YoY on like-to-like basis), up 83% YoY. The miss was due to lower-than-expected gross margins, owing to product and geography mix changes. Adj. PAT was up 6% YoY at INR3.6b (v/s est. INR5.9b). 1HFY20 like-to-like revenue/EBITDA grew 9%/11%.
- LATAM sustains growth; muted show in North America, Europe and ROW: LATAM delivered revenue growth of 24% YoY in 2QFY20 - the fifth consecutive quarter of 20%+ YoY growth. However, North America (NA) and Rest of World (ROW) declined 1% and 4%, respectively, owing to competitive pressure (in NA) and severe drought conditions in South East Asia. Consolidated gross margins were dented due to (a) lower revenue contribution from Europe/US regions, which yield higher margins, (b) product mix changes, and (c) currency depreciation. According to management, cost and revenue synergy from the Arysta acquisition stood at INR1.9b in 2QFY20.
- Key concall takeaways: (i) Maintained guidance for 8-10% revenue growth and 16-20% EBITDA growth in FY20, and (ii) Gross debt as at Sep'19 stood at INR309b v/s INR293b in Mar'19; UPLL maintains its debt reduction guidance of USD500m in FY20.
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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