Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
¾ UPL’s diversified geographical presence provide cushion
against slowing domestic rural growth. Buoyant growth in
key global markets to ensure growth for UPL
¾ Recent acquisition in Latin American markets has
strengthened its RoW presence whose contribution has
increased to 39% of total revenues from 33% earlier
¾ H2FY12 is likely to witness strong growth since Q4 is a
seasonally strong quarter for North America & Europe. DVA
contribution & seasonally strong Q3 for RoW to boost growth
¾ Stock has underperformed at 6.5x 1 yr fwd earnings
compared to average of 13x enjoyed historically. Expect
valuation gap to bridge, maintain Buy with target of Rs 215
Diversified geographical spread should help UPL to beat demand
pressure in Indian agrochemical markets
UPL’s diversified geographical presence (India-25%, North America-18%, Europe-7% &
Rest of World (RoW) -39% of revenues in FY12) enables the company to reap benefits
from varied geographies with different demand profiles. While domestic agrochemical
market is under pressure due to moderating rural growth, Europe and North America
remain on track. North American pipeline remains strong and company is likely to
witness organic volume growth in excess of 15% during the current year. Since, Q4 is a
seasonally strong quarter in these geographies we are likely to witness strong growth in
these regions in H2FY12. UPL’s recent acquisition in Latin American markets has also
strengthened its Rest of World (RoW) presence whose contribution has increased to
39% of total revenues from 33% earlier. RoW operations remain strong with growth
being driven primarily from Latin American countries.
Pressure on domestic market and debt on balance sheets poses risk to
company’s earnings
Though UPL is a diversified global players but its revenue share from India markets has
increased to 22% in FY10 to 24% in FY12E. With pressure on domestic agrochemical
demand, company’s domestic revenues may come under pressure. However its global
revenues / profits are likely to gain from currency depreciation. UPL also has significant
debt of Rs 32 bn, where it may see some M-T-M loss in near term. However UPL
continue to hold has cash of ~ Rs 1 bn to support the funding of any acquisition
opportunity in future.
Earnings might surprise in H2FY12, maintain Buy
UPL’s expanding global footprint has enabled the company to record topline CAGR of
17% and APAT CAGR of 23% over FY08-11. Historically, UPL has commanded a PE
multiple of 6x-20x with an average of 13x during FY06-11 however multiples have
currently fallen to 6.5x due to concerns on growth in global markets, high debt and
impact of currency depreciation. We believe that concerns are overdone with stock
trading at 50% discount to its historical average P/E multiple and earnings are likely to
surprise in H2FY12 driven by strong growth in North American & Latin American
markets. We maintain Buy with target price of Rs 215.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
¾ UPL’s diversified geographical presence provide cushion
against slowing domestic rural growth. Buoyant growth in
key global markets to ensure growth for UPL
¾ Recent acquisition in Latin American markets has
strengthened its RoW presence whose contribution has
increased to 39% of total revenues from 33% earlier
¾ H2FY12 is likely to witness strong growth since Q4 is a
seasonally strong quarter for North America & Europe. DVA
contribution & seasonally strong Q3 for RoW to boost growth
¾ Stock has underperformed at 6.5x 1 yr fwd earnings
compared to average of 13x enjoyed historically. Expect
valuation gap to bridge, maintain Buy with target of Rs 215
Diversified geographical spread should help UPL to beat demand
pressure in Indian agrochemical markets
UPL’s diversified geographical presence (India-25%, North America-18%, Europe-7% &
Rest of World (RoW) -39% of revenues in FY12) enables the company to reap benefits
from varied geographies with different demand profiles. While domestic agrochemical
market is under pressure due to moderating rural growth, Europe and North America
remain on track. North American pipeline remains strong and company is likely to
witness organic volume growth in excess of 15% during the current year. Since, Q4 is a
seasonally strong quarter in these geographies we are likely to witness strong growth in
these regions in H2FY12. UPL’s recent acquisition in Latin American markets has also
strengthened its Rest of World (RoW) presence whose contribution has increased to
39% of total revenues from 33% earlier. RoW operations remain strong with growth
being driven primarily from Latin American countries.
Pressure on domestic market and debt on balance sheets poses risk to
company’s earnings
Though UPL is a diversified global players but its revenue share from India markets has
increased to 22% in FY10 to 24% in FY12E. With pressure on domestic agrochemical
demand, company’s domestic revenues may come under pressure. However its global
revenues / profits are likely to gain from currency depreciation. UPL also has significant
debt of Rs 32 bn, where it may see some M-T-M loss in near term. However UPL
continue to hold has cash of ~ Rs 1 bn to support the funding of any acquisition
opportunity in future.
Earnings might surprise in H2FY12, maintain Buy
UPL’s expanding global footprint has enabled the company to record topline CAGR of
17% and APAT CAGR of 23% over FY08-11. Historically, UPL has commanded a PE
multiple of 6x-20x with an average of 13x during FY06-11 however multiples have
currently fallen to 6.5x due to concerns on growth in global markets, high debt and
impact of currency depreciation. We believe that concerns are overdone with stock
trading at 50% discount to its historical average P/E multiple and earnings are likely to
surprise in H2FY12 driven by strong growth in North American & Latin American
markets. We maintain Buy with target price of Rs 215.
No comments:
Post a Comment