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UPL – Stock For the Month of December 2018

Price: Rs. 746.20

About the Company

United Phosphorus Ltd. (“UPL” or the “Company”) is a global generic crop protection, chemicals and seeds company. The Company manufactures and markets agrochemicals, industrial chemicals, chemical intermediates, and specialty chemicals in 130+ countries across all six continents. The Company’s segments include Agro activity and Non-agro activity.

  • Agro activity segment includes the manufacturing of agrochemical products, seeds and other agricultural related products.
  • Non-agro activity segment includes the manufacturing of industrial chemicals and other non-agriculture related products.
  • It offers products like fungicides, herbicides, insecticides, plant growth and regulators, rodenticides, industrial and specialty chemicals, and nutrifeeds.

UPL Brief

  • 2nd Largest post-patent agrochemicals company globally
  • 130+ Countries with sales presence
  • 35 Manufacturing facilities
  • 25+ Successful acquisition integrations in the past 20 years
  • 241 Granted patents
  • 6,181 Registrations
  • 14% Revenue CAGR over FY13-18

UPL – From Local to a Global Player

UPL

Well Diversified Geographical Footprint

The Company sells its products in approximately 130 countries. It has 14 Manufacturing units in India and 19 outside India. Almost 80% of the revenue comes from Outside India. Regions of Latin America, Europe, and the North America continue to remain largest markets outside India. This helps Company in getting balanced revenue throughout the year and reduces the risk of fluctuating demand from any one region.

Revenue by Geography

  • North America – 18%
  • Europe – 13%
  • Latin America – 33%
  • India – 18%
  • Rest of World – 18%

Strong Product Portfolio

The Company is now a one stop solution for farmers in their all agriculture related needs. The Company offers full suite of crop solutions including seeds and crop protection products and has 6,181 of product registrations across countries.

Steadily evolving into an all encompassing product portfolio

Full suite of Crop Solutions

Seeds

Herbicide

Insecticide

Fungicide

Fumigants & Storage

Speciality Post Harvest

Provide added value to farmers through superior genetics

Prevent or reduce weeds which hamper crop growth and harvest

Control insect pests which reduce crop yields and quality

Prevent and cure fungal plant diseases

Pest control

Technical applications like special coatings

Presence across value chain:

UPL

Strong Financials

The Company has shown consistent growth over the last 5 years (i.e. 2012-13 to 2017-18). Its net revenue from operations over this period grew at an impressive CAGR of 14%. For FY 2018, income from operations increased by 7% to Rs. 17,378.00 Cr. from Rs. 16,312.00 Cr. and PAT increased by 17 % to Rs. 2,022.00 Cr. from Rs. 1,727.00 Cr.

INVESTMENT CONCERNS

Demand concerns due to cyclical and seasonal effects

The agro-chemical industry, in general, is cyclical in nature with demand for some products staying variable. Seasonal usage follows varying agricultural seasonal patterns, weather conditions and pest related pressures. This volatility impacts the overall demand for agro chemicals. However, this seasonality risk is mitigated to a certain extent for UPL, given its geographic reach.

Volatility In Input Prices

The Company operates under the concept of ‘pass-through’, where lower raw material costs benefits are passed on to consumers as lower prices and vice versa. High volatility in prices of raw materials for agro chemicals, leads to lower price realization for the company and can cause margin pressures given that the average holding period of inventory is 3-4 months.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.