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UBS Investment Research
United Phosphorus Limited
C EO meeting reassuring
Event: CEO meeting
Highlights: 1) UPL is preparing for US$5.5bn of products going off-patent in next
3-4 years. 2) Nufarm and MAI, key competitors in acquiring molecules/companies,
have become less aggressive; implying good opportunities for UPL though
valuations are more demanding. 3) Focus on branded products over long term to
aid higher margins. 4) Focus on high-growth markets in Brazil and India with
enhanced distribution and products. 5) Strong outlook for demand over next year.
6) Targets to more than double revenues over 5 years, with higher margins.
Impact: Maintain estimates
We came away from the meeting reassured on demand outlook as well as a
proactive management keen to sustain long-term growth. However, we remain
cautious on impact of Chinese entry on acquisition opportunities and generic
opportunity beyond next 3-4 years, though their initiatives (as above) should aid
higher-than-peers growth even over long-term. Maintain our estimates.
Action: Buy, cheap valuations
UPL stock looks attractive at 8.9 FY12E P/E vs peers which are trading at higher
multiples, despite UPL’s higher growth and stronger balance sheet (table inside).
Valuation: Maintain Buy with a PT of Rs210
We derive our price target from a DCF-based methodology using UBS’s VCAM
tool, implying FY12/FY13E PE of 11.8x/10.1x.
United Phosphorus Limited
United Phosphorus Limited (UPL) is the largest producer of crop protection
products in India with a range of products that include fumigants, fungicides,
insecticides, rodenticides and herbicides. The company's main business is
agrochemicals and industrial & specialty chemicals. Earlier this year, UPL made
its largest acquisition to date by acquiring Cerexagri, which has a significant
presence in the US and Europe. Post this acquisition, UPL is the 12th largest
agrochemical and 3rd largest generic agrochemical company globally. UPL has
fully owned subsidiaries in the US, UK, China, Australia, and Russia.
Statement of Risk
The chief risks facing United Phosphorus are execution risk in integration of its
various acquisitions, regulatory risk in different markets, currency risk and
weather related risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
United Phosphorus Limited
C EO meeting reassuring
Event: CEO meeting
Highlights: 1) UPL is preparing for US$5.5bn of products going off-patent in next
3-4 years. 2) Nufarm and MAI, key competitors in acquiring molecules/companies,
have become less aggressive; implying good opportunities for UPL though
valuations are more demanding. 3) Focus on branded products over long term to
aid higher margins. 4) Focus on high-growth markets in Brazil and India with
enhanced distribution and products. 5) Strong outlook for demand over next year.
6) Targets to more than double revenues over 5 years, with higher margins.
Impact: Maintain estimates
We came away from the meeting reassured on demand outlook as well as a
proactive management keen to sustain long-term growth. However, we remain
cautious on impact of Chinese entry on acquisition opportunities and generic
opportunity beyond next 3-4 years, though their initiatives (as above) should aid
higher-than-peers growth even over long-term. Maintain our estimates.
Action: Buy, cheap valuations
UPL stock looks attractive at 8.9 FY12E P/E vs peers which are trading at higher
multiples, despite UPL’s higher growth and stronger balance sheet (table inside).
Valuation: Maintain Buy with a PT of Rs210
We derive our price target from a DCF-based methodology using UBS’s VCAM
tool, implying FY12/FY13E PE of 11.8x/10.1x.
United Phosphorus Limited
United Phosphorus Limited (UPL) is the largest producer of crop protection
products in India with a range of products that include fumigants, fungicides,
insecticides, rodenticides and herbicides. The company's main business is
agrochemicals and industrial & specialty chemicals. Earlier this year, UPL made
its largest acquisition to date by acquiring Cerexagri, which has a significant
presence in the US and Europe. Post this acquisition, UPL is the 12th largest
agrochemical and 3rd largest generic agrochemical company globally. UPL has
fully owned subsidiaries in the US, UK, China, Australia, and Russia.
Statement of Risk
The chief risks facing United Phosphorus are execution risk in integration of its
various acquisitions, regulatory risk in different markets, currency risk and
weather related risk.
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