26 October 2015
2QFY16 Results Update | Sector: Agro
UPL
BSE SENSEX
27,362
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val (INR m)
Free float (%)
S&P CNX
8,261
UPLL IN
428.6
192/3
576/300
-10/-6/32
1018
70.2
CMP: INR448
TP: INR590 (+32%)
Buy
Forex loss hurts performance despite strong volume growth of 13%
2QFY16 performance was below estimate, with ~5% YoY revenue growth (v/s est.
13%) and adj. PAT of ~INR1.9b (v/s est. ~INR2.5b), impacted by Fx and higher tax.
Consolidated revenue grew 5% YoY to ~INR28b (v/s est. ~INR30b). India revenue
grew ~5% YoY and international revenue growth was ~5%. International revenue
was driven by 10% growth in the US and ~12% in RoW. While volumes grew ~13%,
pricing growth was ~2% and forex impacted growth by 11%.
Gross margin of 39.1% improved 50bp YoY, translating into EBITDA margin
improvement of 70% YoY to 18.7% (v/s est. ~18.6%).
Net forex loss of ~INR610m (~INR360m in interest cost and ~INR250m in other
income) and higher tax further impacted adj. PAT, which was ~INR1.9b (+6% YoY).
Working capital increased by 7 days YoY (~17 days QoQ) to 110 days, impacted by
~10 days YoY increase in inventory. Net debt continued to increase and stood at
~INR37.8b (~INR10b QoQ, ~INR13b YoY).
Key highlights from call:
a) Continuous pressure on soft commodity prices, dry
weather in Asia (including India) and volatility in LatAm’s Fx were the key factors
hurting revenue growth. b) Maintains guidance of 12-15% revenue growth
(excluding forex impact) and 60-100bp margin expansion. c) Continued
devaluation in Brazil, Mexico and Colombia is resulting in distributors delaying
purchases. d) Higher sowing area for soya in LatAm would benefit UPL. e) Europe
crop cycle is shortened due to dry and high temperatures, impacting fungicide
demand. f) In France, ‘Eco-Tax’ on Mancozeb has reduced its attractiveness.
Valuation & view:
We cut our FY16/17 EPS estimates by ~12.5%/8% to ~INR30/39
to factor in for weakness in demand and Fx impact. The stock trades at 15x/11.4x
FY16E/17E EPS. Maintain
Buy
with a target price of INR590 (~15x FY17E EPS).
Financials & Valuation (INR Billion)
Y/E Mar
2015 2016E 2017E
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh. INR
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
120.9 133.6 150.3
23.6 26.4 30.6
11.5 12.8 16.9
26.9 29.9 39.3
11.2 11.2 31.4
136.7 162.6 197.8
20.8 20.0 21.8
21.7 22.1 24.2
16.6 15.0 11.4
3.3
2.8
2.3
Estimate change
TP change
Rating change
8-12%
8%
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

UPL
Fx dilutes strong volume growth, resulting in 5% YoY revenue growth
Consolidated revenue grew by 5% YoY to ~INR28b (v/s est ~INR30b).
India revenue grew ~5% YoY and international revenue growth was ~5%.
International revenue was driven by 10% growth in US and ~12% in RoW.
While volumes grew ~13%, pricing growth was ~2% and forex impacted growth
by 11%.
India business grew just ~5% YoY, impacted by drought condition, reduced
acreage for rice and cotton, and lower pest infestation in rice and very high
infestation in cotton.
LatAm has seen on time sowing, with increase in acreage for Soya, where UPL
has strong portfolio. However, high Fx volatility has led to
Exhibit 2: Break-down of Revenue Growth (%)
Volume growth
4
2
8.6 11.1
5.2
2
5
-2
15
13
2
2
7
1
12
3
10
8
5
6
4
6
3
Pricing growth
Fx benefit
Exhibit 1: Revenue growth driven by India and RoW
Revenues (INR b)
32.3
20.2
4.8
10.5
25.5
15.3
Growth (%)
18.4
12.3 14.3 15.1
4
16
2
15
-2
2
16
-2
18
-2
-8
0
16
-5
2
13
-11
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: Trend in market mix
INR m
Domestic Business
Contribution (%)
International Business
Contribution (%)
US
Contribution (%)
EU
Contribution (%)
RoW
Contribution (%)
- of which LatAm
Contribution (%)
Total
2QFY16 2QFY15 YoY (%) 1QFY16 QoQ (%)
FY15
FY14 YoY (%)
7,150
6,820
4.8 10,830
-34.0 26,220 22,450
16.8
25.5
25.6
35.3
21.7
20.8
20,860 19,800
5.4 19,810
5.3 94,690 85,260
11.1
74.5
74.4
64.7
78.3
79.2
3,740
3,400
10.0
5,530
-32.4 22,590 21,220
6.5
13.4
12.8
18.0
18.7
19.7
3,580
3,990
-10.3
5,050
-29.1 20,330 20,160
0.8
12.8
15.0
16.5
16.8
18.7
13,540 12,410
9.1
9,230
46.7 51,770 43,880
18.0
48.3
46.6
30.1
42.8
40.7
9,580
8,880
7.9
5,870
63.2 34,060 28,560
19.3
34.2
33.4
19.2
28.2
26.5
28,010 26,620
5.2 30,640
-8.6 120,910 107,710
12.3
Source: Company, MOSL
EBITDA margin expands despite Fx
26 October 2015
Gross margin of 39.1%, improved by 50bp YoY, translating into EBITDA margin
improvement of 70% YoY to 18.7% (v/s est ~18.6%).
Net Forex loss of ~INR610m (~INR360m in interest cost and ~INR250m in other
income) coupled with higher tax (due to higher contribution from India and
Brazil) further impacted adj. PAT to ~INR1.9b (+6% YoY).
Working capital increased by 7 days YoY (~17 days QoQ) to 110 days, impacted
by ~10 days YoY increase in inventory.
Net debt continued to increase, with ~INR10b QoQ (~INR13b YoY) to ~INR37.8b,
impacted by increase in working capital, capex (~INR2b in 2QFY16/ ~INR4.6b in
2

UPL
1HFY16), acquisition of 40% stake in Sin-Agro for ~INR3b and dividend outgo of
~INR2.15b.
Exhibit 4: Trend in EBITDA
EBITDA (INR m)
Margins (%)
21.7
20.1
19.0
17.6
17.6
18.6
18.3
19.0
17.6
18.0
18.9
19.2
18.7
Source: Company, MOSL
Exhibit 5: Common Size Statement (%)
2QFY16 2QFY15 Chg (bp) 1QFY16 Chg (bp)
Sales
RM Cost
Staff Cost
Other Exp
EBITDA
100
48.8
9.9
22.6
18.7
100
48.6
9.6
23.7
18.0
20
40
-120
60
100
49.0
9.4
22.4
19.2
-20
50
20
-50
FY15
100
49.8
8.6
22.1
FY14 Chg (bp)
100
50.5
8.8
21.9
-80
-20
10
19.5
18.7
80
Source: Company, MOSL
Exhibit 6: Trend in Working Capital (days)
Net working capital (days)
Exhibit 7: Trend in Debt (INR b)
Gross Debt (INR b)
Net Debt (INR b)
Source: Company, MOSL
Source: Company, MOSL
Maintains guidance for FY16 at 12-15% revenue growth (Ex Forex impact)
It has maintained guidance for FY16 at revenue growth of 12-15% (constant
currency) driven by volumes and pricing growth.
It expects EBITDA margins to improve 60-100bp, driven by improvement in gross
margins.
It expects tax rate of 22-25%.
It expects full year working capital at 90-95 days.
It plans to invest ~INR7.5b in Capex.
26 October 2015
3

UPL
Key highlights from the conference call
Continuous pressure on soft commodity prices, dry weather in Asia (incl India)
and volatility in LatAm’s Fx were key factors hurting revenue growth.
Lower water table levels in India might impact demand during Rabi season.
However, acreage for pulses are expected to increase.
Continued devaluation in Brazil, Mexico and Colombia is resulting in distributors
delaying purchases.
Higher sowing area for Soya in LatAm would benefit UPL. Further, it expects
good demand for its recent product registration (Glory) in Brazil is expected to
drive strong growth. This coupled with another 5-6 registration in Argentina and
Mexico would help UPL to grow faster than the industry in LatAm.
Europe crop cycle is shortened due to dry and high temperatures, impacting
fungicide demand
In France, ‘Eco-Tax’ on Mancozeb has reduced its attractiveness, impacting UPL.
Valuation and view
We cut our estimates for FY16/17 EPS by ~12.5%/8% to ~INR30/39, to factor in
for weakness in demand and Fx impact.
UPL’s strategy of expanding product portfolio, market footprint and leveraging
on India low cost advantage has enabled it to grow faster and gain market share
in the global agrochemical industry.
We see sustenance of its superior growth over next 3-5 years as it a) launches
new products in existing markets, b) entry into new markets with existing
product portfolio and c) focus on branded products. We estimate ~13% CAGR in
revenues over FY15-17E.
Long term outlook remains positive with realization of integration benefits from
DVA Agro to be fully realized over next 3-4 quarters.
Strong volumes and revenue growth coupled with gradual realization of
synergies of DVA Agro would drive margin improvement (+110bp) and profit
growth (~26% CAGR).
The stock trades at 15x/11.4x FY16E/17E EPS. Maintain
Buy
with a target price
of INR590 (~15x FY17E EPS).
Maintain Buy with a target price of INR643 (~15x FY17E EPS).
Revised estimates
(INR B)
Net Sales
EBITDA
Net Profit
EPS (Rs)
Rev
133.6
26.4
12.8
29.9
FY16E
Old
136.4
27.2
14.7
34.2
Chg (%)
-2.1
-2.9
-12.5
-12.5
Rev
150.3
30.6
16.9
39.3
FY17E
Old
154.0
31.7
18.4
42.9
Chg (%)
-2.4
-3.5
-8.3
-8.3
Source: MOSL
26 October 2015
4

UPL
Financials and valuations
Consolidated Income Statement
Y/E March
Net Revenue
Change (%)
Total Expenditure
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income - Rec.
PBT before EO Expense
EO Expense/(Income)
PBT after EO Expense
Tax
Tax Rate (%)
Profit after Tax
Add: Share of profits of associate
Less: Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
2011
57,607
8.9
46,939
10,668
18.5
2,138
8,530
3,120
1,375
6,784
140
6,644
731
11.0
5,914
-234
104
5,576
5,701
50.4
9.9
2012
76,713
33.2
62,873
13,840
18.0
2,924
10,916
4,146
923
7,693
406
7,287
1,280
17.6
6,007
-398
54
5,556
5,890
3.3
7.7
2013
91,945
19.9
75,327
16,618
18.1
3,537
13,081
4,290
1,000
9,791
352
9,439
2,032
21.5
7,407
323
-16
7,746
8,022
36.2
8.7
2014
107,709
17.1
87,526
20,183
18.7
4,069
16,113
4,853
1,314
12,574
1,092
11,482
2,217
19.3
9,266
304
72
9,498
10,379
29.4
9.6
2015
120,905
12.3
97,279
23,626
19.5
4,245
19,381
5,170
-28
14,182
123
14,060
2,440
17.4
11,619
254
433
11,440
11,542
11.2
9.5
(INR Million)
2016E
133,589
10.5
107,144
26,445
19.8
4,765
21,680
4,795
-385
16,501
0
16,501
3,795
23.0
12,705
530
400
12,836
12,836
11.2
9.6
2017E
150,267
12.5
119,621
30,646
20.4
5,251
25,395
4,730
650
21,316
0
21,316
4,689
22.0
16,626
737
500
16,863
16,863
31.4
11.2
Consolidated Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Minority Interest
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Account Receivables
Cash and Bank Balance
Other CA
Curr. Liability & Prov.
Account Payables
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2011
924
36,337
37,261
180
25,215
62,655
36,317
13,109
23,209
658
8,232
49,914
14,055
14,795
15,659
5,406
19,358
18,117
1,241
30,557
62,655
2012
924
40,808
41,731
2,499
32,389
76,619
50,319
16,033
34,286
1,000
7,945
59,302
18,779
25,066
7,002
8,455
25,913
23,830
2,083
33,388
76,619
2013
885
45,567
46,452
2,342
41,993
90,788
57,488
19,570
37,918
750
10,252
74,310
20,687
26,931
15,482
11,210
32,442
29,325
3,117
41,868
90,788
2014
857
51,617
52,474
1,721
34,308
88,503
64,646
38,560
26,086
2,278
7,373
79,731
24,801
32,204
10,228
12,499
39,088
35,407
3,681
40,643
76,379
2015
857
57,746
58,603
444
33,251
92,298
65,352
39,537
25,815
5,831
7,636
87,895
29,376
36,841
10,098
11,580
49,372
45,224
4,148
38,523
77,805
(INR Million)
2016E
857
68,827
69,684
453
31,569
101,706
72,352
44,301
28,050
750
8,167
96,056
36,600
38,430
4,557
16,470
45,810
40,260
5,550
50,246
87,213
2017E
857
83,935
84,792
464
29,569
114,826
79,852
49,552
30,299
750
8,904
112,110
41,169
43,228
9,187
18,526
51,731
45,286
6,445
60,380
100,333
26 October 2015
5

UPL
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Fully diluted EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Asset Turnover (x)
Debtor (Days)
Inventory (Days)
Leverage Ratio
Debt/Equity (x)
2011
12.3
12.3
17.0
80.7
2.0
18.2
2012
12.8
12.8
19.1
90.4
2.5
22.5
2013
18.1
18.1
26.1
105.0
2.5
17.5
2014
24.2
24.2
33.7
122.4
3.0
16.2
2015
26.9
26.9
36.8
136.7
3.5
15.1
2016E
29.9
29.9
41.1
162.6
3.5
13.8
2017E
39.3
39.3
51.6
197.8
3.5
10.6
16.6
12.2
3.3
1.7
9.1
0.8
15.0
10.9
2.8
1.6
8.3
0.8
11.4
8.7
2.3
1.4
6.9
0.8
17.0
17.0
14.9
17.3
18.2
17.3
21.0
19.9
20.8
21.7
20.0
22.1
21.8
24.2
0.9
94
89
1.0
119
89
1.0
107
82
1.4
109
84
1.6
111
89
1.5
105
100
1.5
105
100
0.7
0.8
1.0
0.7
0.6
0.5
0.4
Consolidated Cash Flow Statement
Y/E March
Profit/(Loss) before Tax
Interest/Dividends Recd.
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
2011
11,057
847
-885
-1,884
9,135
-140
8,995
-8,021
974
-1,628
-9,648
0
1,869
-1,095
-1,091
-316
-969
16,701
15,732
2012
14,329
694
-1,242
-11,271
2,509
-196
2,313
-7,091
-4,777
101
-6,990
0
1,657
-2,783
-1,156
-2,282
-6,958
15,732
8,774
2013
17,737
650
-1,438
1,043
17,992
-350
17,642
-4,120
13,522
-4,081
-8,202
-2,246
6,235
-3,379
-1,427
-817
8,623
8,774
17,397
2014
15,330
-2,217
-4,029
9,083
1,092
10,175
6,236
16,411
2,879
9,114
-1,972
-7,685
-1,504
-11,161
8,128
17,397
25,525
2015
18,456
-2,440
1,990
18,006
123
18,129
-7,528
10,601
-264
-7,791
-3,556
-1,056
-1,755
-6,368
3,970
25,525
29,495
2016E
21,650
-3,795
-17,264
591
0
591
-1,919
-1,328
-530
-2,449
0
-1,682
-1,755
-3,437
-5,296
29,495
24,199
(INR Million)
2017E
25,917
-4,689
-5,503
15,724
0
15,724
-7,500
8,224
-737
-8,237
0
-2,000
-1,755
-3,755
3,732
24,199
27,931
EO Expense
CF frm Oper. incl EO exp
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
26 October 2015
6

UPL
Corporate profile: UPL
Company description
United Phosphorus is USD1.8b company with a
strong presence in crop protection and industrial
chemicals. With around ~80% of its revenues
coming from international markets, the company
has emerged as the third largest generic player in
the world. United Phosphorus’ growth strategy is
built around filing its own registrations globally and
acquiring tail end brands of global majors in
regulated markets.
Exhibit 9: Sensex rebased
UPL
580
505
430
355
280
Oct-14
Sensex - Rebased
Jan-15
Apr-15
Jul-15
Oct-15
Exhibit 9: Shareholding pattern (%)
Jun-15
Promoter
DII
FII
Others
29.8
9.1
48.9
12.2
Mar-15
29.8
10.1
46.4
13.8
Jun-14
29.8
7.1
48.7
14.5
Exhibit 10: Top holders
Holder Name
Government Pension Fund Global
Skagen Kon Tiki Verdipapirfond
Invesco Asian Equity Fund
Government of Singapore
ICICI Prudential Life Insurance Company Ltd
% Holding
2.6
2.3
1.4
1.3
1.2
Note: FII Includes depository receipts
Exhibit 11: Top management
Name
Jaidev R Shroff
Vikram R Shroff
Sagar Kaushik
Rajendra Darak
Anand Vora
Designation
Global CEO
Executive Director
Chief Operating Officer
Group CFO
CFO
Exhibit 12: Directors
Name
Rajnikant Devidas Shroff
Sandra R Shroff
P V Krishna*
Vinod Sethi*
Pradeep Goyal*
Pradip Madhavji*
*Independent
Name
Reena Ramachandran*
Jaidev R Shroff
A C Ashar
Vikram R Shroff
Kalyan Banerjee
Exhibit 13: Auditors
Name
S R B C & Co LLP
S V Ghatalia & Associates LLP
RA & Co
Type
Statutory
Statutory
Cost Auditor
Exhibit 14: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
MOSL
forecast
29.9
39.3
Consensus
forecast
33.2
39.5
Variation
(%)
-9.7
-0.3
26 October 2015
7

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UPL
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