RESULTS REVIEW 3QFY15

3 FEB 2015

UPL Ltd
BUY
INDUSTRY

AGROCHEMICAL

CMP (as on 2 Feb 2015)

Rs 393

Target Price

Rs 460

Nifty

8,797

Sensex

29,122

KEY STOCK DATA

Bloomberg/Reuters

UPLL IN/UPLL.BO

No. of Shares (mn)

429

MCap (Rs bn) / ($ mn)

169/2,729

6m avg traded value (Rs mn)

623

STOCK PERFORMANCE (%)

52 Week high / low

Rs 396/177
3M

6M

12M

Absolute (%)

13.0

18.4

108.2

Relative (%)

8.5

4.1

66.3

SHAREHOLDING PATTERN (%)

Promoters
FIs & Local MFs

29.80
8.62

FIIs

46.47

Public & Others

15.11

Source : BSE

Satish Mishra
satish.mishra@hdfcsec.com
+91-22-6171-7334

Momentum continues
3QFY15 highlights

UPLs 3QFY15 revenues were Rs 30.5bn (+15% YoY)

mainly led by volume growth. EBITDA margin
expanded to 18.9% (+129 bps) led by lower operating
expenses. Consequently, EBITDA came in at Rs 5.7bn
(+24%). However, lower other income (Rs 136mn, 73%) and higher interest cost (Rs 1.4bn, +26%, higher
forex losses) restricted APAT to Rs 2.6bn (+5%).

Revenue growth : Volume +16%, price +2% and

exchange impact -2%.

Geographic revenue growth: India (+25%), Latin

America (+14%), Europe (+2%), North America (+3%)
and ROW (+22% YoY).

We remain positive on the long term growth

prospects of UPL. Assurance of no big acquisition and
focus on product/geographical consolidation further
improves outlook. Mgt maintained its guidance for
(1) Revenue growth of 12-15% (2) EBITDA margins at
18-19% (3) Working capital to remain at ~105 days.

Labour shortage and rising cost are driving up usage of

herbicides particularly in India. Muted commodity
prices and excess inventory in some of the areas
remains a concern.

UPL continues to maintain its focus on new launches

and corporate + product branding, which will drive
volumes in the future.

Risks : (1) Regulatory risks (subsidiaries in 88

countries) (2) Cross currency volatility. Europe/Latin
America/RoW contributes 18/27/15% of revenues.

Valuations and view : Maintaining high revenue

Diversified portfolio and geographical spread protect

UPL from weather/commodity shocks. Strong
growth, no acquisition and debt reduction will reduce
valuation discount to peers. Maintain BUY and raise
TP to Rs 460 (14x FY17E EPS, rolling fwd to FY17E and
raising multiple from 13x to 14x vs 20/18x for PI
Industries/Rallis India).
FINANCIAL SUMMARY (CONSOLIDATED)
Year Ending March (Rs mn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

3QFY15
30,472
5,746
2,616
6.1

Source: Company, HDFC sec Inst Research

3QFY14
26,469
4,651
2,489
5.8

YoY (%)
15.1
23.6
5.1
5.1

2QFY15
26,623
4,805
1,773
4.1

growth rate and cash generation will be the key

drivers. With no major capex, net D/E should reduce
from 0.4x in FY14 to 0.1x by FY17E. UPL trades at
12.0/2.0x FY17E EPS/BV. Maintain BUY, TP Rs 460.
QoQ (%)
14.5
19.6
47.5
47.5

FY13
91,945
16,618
7,982
18.6
21.1
11.4
18.1

FY14
107,709
20,196
10,313
24.1
16.3
9.3
20.9

FY15E
121,373
22,757
11,341
26.5
14.9
8.1
19.9

FY16E
FY17E
134,646 149,172
24,842
27,433
12,099
14,093
28.2
32.9
13.9
12.0
7.2
6.3
18.2
18.3

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

UPL : RESULTS REVIEW 3QFY15

QUARTERLY FINANCIALS SNAPSHOT (CONSOLIDATED)

Higher interest Cost (+26%) is

due to higher forex losses (Rs
440mn vs Rs 170mn)

(Rs mn)
Net Sales
Material Expenses
Employee Expenses
Other Expenses
EBITDA
Other Income
Depreciation
PBIT
Interest
E/o items
PBT
Tax
PAT
Minority Interest/Associate
RPAT
APAT
AEPS (Rs/sh)

3QFY15
30,472
15,413
2,640
6,673
5,746
136
1,086
4,796
1,381
184
3,231
598
2,632
(140)
2,493
2,616
6.1

3QFY14
26,469
13,244
2,619
5,955
4,651
501
1,043
4,108
1,095
397
2,615
521
2,094
129
2,222
2,489
5.8

YoY (%)
15.1
16.4
0.8
12.1
23.6
(72.9)
4.0
16.7
26.1

QoQ (%)
14.5
19.0
3.6
5.5
19.6
(20.7)
(0.5)
23.5
(1.5)

12.2
5.1
5.1

2QFY15
26,623
12,948
2,547
6,323
4,805
171
1,092
3,885
1,401
168
2,315
462
1,853
(193)
1,661
1,773
4.1

3QFY15
50.6
8.7
21.9
18.9
8.6
15.7

3QFY14
50.0
9.9
22.5
17.6
9.4
19.9

YoY (bps)
55
(123)
(60)
129
(82)
(420)

2QFY15
48.6
9.6
23.7
18.0
6.7
19.9

QoQ (pbs)
195
(90)
(185)
81
192
(421)

3QFY15
5,320
6,030
3,320
4,650
11,290
30,610

3QFY14
5,180
4,840
3,260
3,820
9,870
26,970

YoY (%)
2.7
24.6
1.8
21.7
14.4
13.5

2QFY15
3,420
6,860
4,010
3,560
8,940
26,790

QoQ (%)
55.6
(12.1)
(17.2)
30.6
26.3
14.3

23.5
14.8
25.7

39.5
29.6
42.0
50.1
47.5
47.5

Source: Company, HDFC sec Inst Research

MARGIN ANALYSIS

Lower operating expenses

boosted EBITDA margins

Material Expenses as % of Net Sales

Employee Expenses as % of Net Sales
Other Expenses as % of Net Sales
EBIDTA Margin (%)
Net Profit Margin (%)
Tax Rate (%)
Source: Company, HDFC sec Inst Research

SEGMENTAL REVENUES

Growth was robust in most of

the geographies

North America
India
Europe
RoW
Latin America
Total
Source: Company, HDFC sec Inst Research

Page | 2

UPL : RESULTS REVIEW 3QFY15

ASSUMPTIONS

Growth will be driven by India,

Latin America and ROW

FY12

FY13

FY14

FY15E

FY16E

FY17E

Revenues YoY Growth (%)

North America
India
Europe
Rest of World
Latin America

27.4
15.1
16.0
57.7
-

31.5
5.0
20.8
21.8
21.3

13.5
25.9
18.8
14.5
16.6

5.5
17.0
6.0
16.0
15.0

6.0
12.0
6.0
14.0
15.0

6.0
12.0
6.0
14.0
14.0

Tax Rate (%)

Cash conversion cycle (days)
Capex (Rs bn)

17.6
137
9.3

21.5
105
5.0

19.2
102
5.7

18.0
105
6.0

24.0
105
6.0

24.0
105
6.0

Source : Company, HDFC sec Inst Research

CHANGE IN ESTIMATES
(Rs mn)

Change in estimates factoring

higher margins

FY16E Old

FY16E New

YoY Gr (%)

FY17E Old

FY17E New

YoY Gr (%)

Revenue

131,980

134,646

2.0

146,157

149,172

2.1

EBITDA

23,888

24,842

4.0

26,454

27,433

3.7

PAT

12,016

12,099

0.7

13,473

14,093

4.6

28.0

28.2

0.7

31.4

32.9

4.6

EPS (Rs/sh)
Source : Company, HDFC sec Inst Research

PEER VALUATIONS
CMP
(Rs/sh)

Mcap
(Rs bn)

Rating

EPS (Rs/sh)

P/E

FY15E FY16E

P/BV

ROE (%)

FY13

FY14

FY13

FY14

FY15E

FY16E

FY13

FY14

FY15E

FY16E

FY13

FY14

FY15E

FY16E

Chambal Fert
Coromandel Int
Deepak Fert
GSFC

61
283
142
98

25.3
80.1
12.5
39.1

BUY
BUY
SELL
BUY

5.9
12.6
26.8
8.6

7.8
15.5
13.8
11.3

8.7
19.3
17.3
13.9

9.2
25.0
24.2
15.0

10.4
22.5
5.3
11.4

7.8
18.3
10.3
8.7

7.0
14.7
8.2
7.1

6.6
11.3
5.9
6.6

1.2
3.5
0.8
0.9

1.1
3.1
0.8
0.9

1.0
2.7
0.8
0.8

0.9
2.3
0.7
0.7

12.5
15.9
16.8
8.4

14.9
18.0
8.0
10.3

14.9
19.7
9.5
11.6

14.1
22.1
12.4
11.4

PI Industries
Rallis India
UPL Ltd

505
224
393

69.2
43.5
168.4

NEU
BUY
BUY

13.9
7.8
24.1

17.4
8.4
26.5

21.3
10.7
28.2

25.5
14.0
32.9

36.5
28.7
16.3

29.1
26.7
14.9

23.7
20.8
13.9

19.8
16.0
12.0

10.0
6.1
3.2

7.7
5.3
2.7

6.1
4.5
2.4

4.8
3.8
2.0

30.7
22.7
20.9

29.7
21.1
19.9

28.4
23.3
18.2

26.9
25.8
18.3

Source : Company, HDFC sec Inst Research

Page | 3

UPL : RESULTS REVIEW 3QFY15

INCOME STATEMENT (CONSOLIDATED)
(Rs mn)
Net Sales
Growth (%)

BALANCE SHEET (CONSOLIDATED)

FY13

FY14

FY15E

FY16E

FY17E

91,945

107,709

121,373

134,646

149,172

(Rs mn)

FY13

FY14

FY15E

FY16E

FY17E

SOURCES OF FUNDS

20.1

17.1

12.7

10.9

10.8

885

857

857

857

857

Material Expenses

46,874

54,408

60,687

67,727

75,033

Reserves

45,567

51,617

60,701

70,293

81,879

Employee Expenses

8,526

9,469

10,195

11,243

12,396

Total Shareholders Funds

46,452

52,474

61,559

71,151

82,736

Share Capital

Other Operating Expenses

19,927

23,636

27,734

30,834

34,309

Minority Interest

2,342

1,721

1,721

1,721

1,721

EBIDTA

16,618

20,196

22,757

24,842

27,433

Long Term Debt

28,123

22,543

22,043

20,043

17,543

EBIDTA Margin (%)

18.1

18.8

18.8

18.5

18.4

Short Term Debt

11,147

6,067

5,567

3,567

3,067

EBIDTA Growth (%)

21.5

21.5

12.7

9.2

10.4

Total Debt

39,270

28,610

27,610

23,610

20,610

1,000

1,314

733

813

900

Other long-term liabilities

3,945

3,109

3,109

3,109

3,109

Other Income
Depreciation
EBIT

3,537

4,069

4,418

4,797

5,169

14,081

17,440

19,073

20,858

23,164

Interest & Financial charges

4,290

4,866

4,754

4,411

4,095

PBT

9,791

12,574

14,318

16,446

19,070

Tax

2,032

2,217

2,577

3,947

4,577

EO profit/(loss)

(352)

(1,009)

RPAT

7,407

9,349

11,741

12,499

14,493

Long-term provisions
TOTAL SOURCES OF FUNDS

514

530

530

530

530

92,524

86,443

94,528

100,119

108,705

13,217

17,121

19,031

20,509

21,760

2,451

2,251

1,751

1,451

1,151

23,000

21,115

21,287

21,312

21,192

7,415

7,373

7,373

7,373

7,373

APPLICATION OF FUNDS
Net Block
CWIP
Goodwill
Investments

Minority Interest

(16)

72

600

600

600

LT Loans & Advances

2,691

3,891

3,891

3,891

3,891

Profit from Associates

323

221

200

200

200

Inventories

20,687

24,801

28,265

31,356

34,739

7,982

10,313

11,341

12,099

14,093

Trade Receivables

26,931

32,204

36,246

40,209

44,547

Cash & Equivalents

18,319

10,228

11,879

12,450

16,026

7,862

7,707

7,707

7,707

7,707

APAT
APAT Growth (%)

39.1

29.2

10.0

6.7

16.5

7,982

10,313

11,341

12,099

14,093

ST Loans & Advances

AEPS

18.6

24.1

26.5

28.2

32.9

Other Current Assets

657

901

901

901

901

EPS Growth (%)

39.1

29.2

10.0

6.7

16.5

Current Assets

74,456

75,840

84,998

92,623

103,919

Trade Payables

21,176

26,940

29,595

32,831

36,373

Other Current Liabilities

7,057

10,244

10,244

10,244

10,244

Provisions

2,603

3,151

3,151

3,151

3,151

Current Liabilities

30,836

40,335

42,990

46,226

49,768

Net current Assets

43,620

35,506

42,007

46,397

54,151

131

(813)

(813)

(813)

(813)

92,524

86,443

94,528

100,119

108,705

APAT (continuing ops)

Source: Company, HDFC sec Inst Research

Net deferred tax asset

TOTAL APPLICATION OF FUNDS

Source: Company, HDFC sec Inst Research

Page | 4

UPL : RESULTS REVIEW 3QFY15

CASH FLOW (CONSOLIDATED)

KEY RATIOS

(Rs mn)

FY13

FY14

FY15E

FY16E

FY17E

Reported PAT

8,353

10,357

11,741

12,499

14,493

Non-operating inc & EO items

FY13

FY14

FY15E

FY16E

FY17E

GPM

49.0

49.5

50.0

49.7

49.7

EBITDA Margin

18.1

18.8

18.8

18.5

18.4

15.3

16.2

15.7

15.5

15.5

PROFITABILITY (%)

154

880

491

545

603

PAT from Operations

8,198

9,477

11,250

11,955

13,890

Interest

4,290

4,866

4,754

4,411

4,095

EBIT Margin

Depreciation

3,537

4,069

4,418

4,797

5,169

APAT Margin

8.7

9.6

9.3

9.0

9.4

399

(84)

(4,815)

(3,782)

(4,143)

RoE

18.1

20.9

19.9

18.2

18.3

Working Capital Change

OPERATING CASH FLOW ( a )
Capex

16,424

18,328

15,607

17,381

19,010

Core RoCE

14.1

17.2

18.4

17.4

18.3

(4,975)

(5,660)

(6,000)

(6,000)

(6,000)

RoCE

13.1

15.9

16.8

15.9

16.5

Free cash flow (FCF)

11,449

12,668

9,607

11,381

13,010

EFFICIENCY
21.5

19.2

18.0

24.0

24.0

1.1

1.2

1.3

1.4

1.4

Investments

(719)

42

435

880

491

545

603

INVESTING CASH FLOW ( b )

(5,259)

(4,738)

(5,509)

(5,455)

(5,397)

Share capital Issuance

(2,235)

(2,830)

6,224

(10,661)

(1,000)

(4,000)

Dividend

(1,334)

(2,006)

(2,257)

Interest

(3,379)

(4,866)

(4,754)

Non-operating income

Debt Issuance

FINANCING CASH FLOW ( c )

NET CASH FLOW (a+b+c)
EO items
Closing Cash & Equivalents

Tax Rate (%)

Asset Turnover (x)
Inventory (days)

82

84

85

85

85

Debtors (days)

107

109

109

109

109

(3,000)

Payables (days)

84

91

89

89

89

(2,507)

(2,507)

Cash Conversion Cycle (days)

105

102

105

105

105

(4,411)

(4,095)

Debt/EBITDA (x)

2.4

1.4

1.2

1.0

0.8

(724)

(20,362)

(8,011)

(10,919)

(9,602)

Net D/E

0.5

0.4

0.3

0.2

0.1

10,441

(6,773)

2,087

1,007

4,012

Interest Coverage

3.3

3.6

4.0

4.7

5.7

(281)

PER SHARE DATA

18,319

10,228

11,879

12,450

16,026

EPS (Rs/sh)

18.6

24.1

26.5

28.2

32.9

CEPS (Rs/sh)

26.9

33.6

36.8

39.4

44.9

Source: Company, HDFC sec Inst Research

DPS (Rs/sh)
BV (Rs/sh)

2.6

4.0

4.5

5.0

5.0

108.4

122.4

143.6

166.0

193.0

21.1

16.3

14.9

13.9

12.0

3.6

3.2

2.7

2.4

2.0

VALUATION
P/E
P/BV
EV/EBITDA

11.4

9.3

8.1

7.2

6.3

Dividend Yield (%)

0.7

1.0

1.1

1.3

1.3

OCF/EV (%)

8.7

9.8

8.5

9.7

11.0

FCF/EV (%)

6.0

6.8

5.2

6.3

7.5

FCFE/Mcap (%)

4.3

4.6

2.9

4.1

5.3

Source: Company, HDFC sec Inst Research

Page | 5

UPL : RESULTS REVIEW 3QFY15

RECOMMENDATION HISTORY

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

Sep-14

Aug-14

TP

Jul-14

May-14

Apr-14

Mar-14

Feb-14

Jun-14

UPL

500
450
400
350
300
250
200
150
100

Date
25-Apr-14

CMP
230

Reco
BUY

Target
280

28-Jul-14
22-Oct-14
3-Feb-15

311
327
393

BUY
BUY
BUY

364
364
460

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 6

UPL : RESULTS REVIEW 3QFY15

Disclosure:
I, Satish Mishra, MBA, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject
issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
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HDFC Securities Ltd, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any
action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc.
HDFC Securities Ltd and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report,
or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report.
HDFC Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any
other assignment in the past twelve months.
HDFC Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report
for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or
specific transaction in the normal course of business.
HDFC Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research
report. Accordingly, neither HDFC Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is
not based on any specific merchant banking, investment banking or brokerage service transactions. HDFC Securities may have issued other reports that are inconsistent with and reach
different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We
have not received any compensation/benefits from the subject company or third party in connection with the Research Report.

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