21 October 2014
2QFY15 Results Update | Sector:
Others
UPL
BSE SENSEX
26,576
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
7,928
UPLL IN
428.6
388/149
-4/35/86
CMP: INR327
TP: INR414
Buy
Margin declines, but gross debt continues to reduce
2QFY15 performance is below estimate with revenues of ~INR26.6b (v/s est
INR27.1b), EBITDA margins of 18% (v/s est of 18.7%), and adj. PAT growth of just
3% YoY to ~INR1.8b (v/s est INR2.2b).
Consolidated revenues grew by 14% YoY. India revenues grew of ~7.5% YoY and
international revenue growth of ~16%. International revenues were driven by 27%
growth in EU, ~30% growth in RoW and 20% growth in LatAm. US revenue
declined 12% YoY. While volumes grew ~15%, pricing grew 2% and forex impacted
growth by 2%.
Gross margins of 38.6% were highest in 14 quarters. However, higher other
expenses on promotion of branded products restricted EBITDA margins at 18% (-
30bp YoY). EBITDA grew 13% to ~INR4.8b (v/s est ~INR5.1b).
Working capital increased QoQ by 8 days to ~102 days (-7 day YoY), for inventory
build-up for LatAm. Gross debt reduced further by ~INR1b QoQ, but net debt
increased ~INR3.3b QoQ, due to working capital increase and dividend payout.
FY15 guidance maintained:
FY15 revenue growth of 12-15% (constant currency),
EBITDA margin of 19-20% and tax-rate of 22-25%. Capex maintained at ~INR5.5b.
Key highlights of the analyst meet:
a) US market has de-grew 3-5% due to soft
commodity prices leading to reduced input intensification, b) launched 2 new
products in US - Satellite (Pendimethalin) & Lifeline (Glufosinate), c) DVA Agro
(Brazilian subsidiary) margins are now comparable with average, but expected to
improve further driven by product mix and operating leverage, d) Low commodity
prices and devaluation of Brazilian Real is a concern for Brazil, and e) higher
market access expected through increased registrations in African countries.
We are downgrading our FY15/FY16 EPS by 4%/1% to INR28.2/34.5, to factor in
for higher other expenses and interest cost. The stock trades at very attractive
valuation of 11.6x/9.5x FY15/FY16 EPS and 2.2x/1.8x FY15/FY16 P/B. Maintain
Buy
with target price of INR414 (~12x FY16E EPS).
M.Cap. (INR b) / (USD b) 140.0/2.3
Financials & Valuation (INR Million)
Y/E Mar
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2015E 2016E 2017E
123,053 138,890 157,237
23,482 27,031 31,397
12,252 14,795 18,017
28.2
16.6
21.0
21.5
11.6
2.2
34.5
22.3
177.3
21.3
23.1
9.5
1.8
42.0
21.8
215.3
21.4
24.2
7.8
1.5
BV/Sh.(INR) 146.9
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Investors are advised to refer through disclosures made at the end of the Research Report.

UPL
Strong pricing improvement and Fx drive 12% YoY revenue growth
Consolidated revenues grew by 14% YoY. India revenues grew of ~7.5% YoY and
international revenue growth of ~16%.
International revenues were driven by 27% growth in EU, ~30% growth in RoW
and 20% growth in LatAm. US revenue declined 12% YoY.
While volumes grew ~15%, pricing grew 2% and forex impacted growth by 2%.
EU business benefited from increased Mancozeb shares both with brands &
institutional sales.
LatAm continues on strong growth path, with several new launches.
RoW business was driven by significant improvement in Australia and continued
expansion in African countries.
Break-down of Revenue Growth
Volume growth
19
8
31
4
12
11
5
4
2 15
5
-2
4
12
4
16
2
2
7
13
1
12
3
2
10
8
5
6
4
6
3
2
15
-2
Pricing growth
Fx benefit
Revenue growth driven by India and US
Revenues (INR b)
56.3
40.9
16.2
19.8
4.8
20.2
Growth (%)
32.3
10.5
25.5
15.3 18.4
18.3
0.6
5
4
31
Source: Company, MOSL
Source: Company, MOSL
Trend in market mix
INR m
Domestic Business
Contribution(%)
International Business
Contribution(%)
US
Contribution(%)
EU
Contribution(%)
RoW
Contribution(%)
- of which LatAm
Contribution(%)
Total
1QFY15
6,860
25.6
19,930
74.4
3,420
12.8
4,010
15.0
12,500
46.7
8,940
33.4
26,790
1QFY14
6,380
27.0
17,220
73.0
3,870
16.4
3,160
13.4
10,190
43.2
7,440
31.5
23,600
20.2
22.7
26.9
-11.6
YoY (%) 4QFY14 QoQ (%)
7.5
9,440
34.0
15.7 18,290
66.0
5,320
19.2
5,020
18.1
7,950
28.7
4,870
17.6
13.5 27,730
83.6
57.2
-20.1
-35.7
9.0
-27.3
FY14
20.8
79.2
19.7
18.7
40.7
26.5
FY13 YoY (%)
25.9
15.2
13.5
18.8
14.5
14.0
19.4
80.6
20.4
18.5
41.7
27.3
22,720 18,050
86,300 74,890
21,480 18,930
20,400 17,170
44,420 38,790
28,910 25,360
17.3
-3.4
109,020 92,940
Source: Company, MOSL
EBITDA margin expansion continues
Gross margins of 38.6% were highest in 14 quarters.
However, higher other expenses on promotion of branded products restricted
EBITDA margins at 18% (-30bp YoY). EBITDA grew 13% to ~INR4.8b (v/s est
~INR5.1b).
2
21 October 2014

UPL
Its focus to reduce share of high volume, low margin product is on track and is
expected to drive improvement in profitability.
Higher interest cost at ~INR1.4b due to ~INR490m of Fx losses, further impacted
PAT with just 3% YoY to ~INR1.8b (v/s est INR2.2b).
It reported extra-ordinary expense of ~INR168m pertaining to concluding
restructuring expenses of LatAm operations.
Working capital was under control at ~94 days (±1 day QoQ/YoY). Gross/net
debt reduced further by ~INR1.3b/INR4b QoQ to ~INR34.3b/INR21.4b.
Trend in EBITDA
EBITDA (INR m)
Margins (%)
20.1
18.1
18.4
17.3
19.0
17.7
17.6
17.6
18.6
18.3
17.6
19.0
18.0
Source: Company, MOSL
Common Size Statement (%)
1QFY15
Sales
RM Cost
Staff Cost
Other Exp
EBITDA
100
48.6
9.6
23.7
18.0
1QFY14 Chg (bp) 4QFY14 Chg (bp)
100
49.9
10.0
21.8
18.3
-130
-40
190
-20
100
47.9
9.2
24.0
19.0
80
40
-20
-90
FY14
100
50.5
8.8
21.9
FY13 Chg (bp)
100
51.0
9.3
21.7
-50
-50
30
18.8
18.1
70
Source: Company, MOSL
Trend in Working Capital (days)
Net working capital (days)
Trend in Debt (INR b)
Net working capital (days)
Source: Company, MOSL
Source: Company, MOSL
Maintains guidance for FY15 at 12-15% revenue growth and 19-20% EBITDA
margins in FY15
It has maintained guidance for FY15 at revenue growth of 12-15% (constant
currency), EBITDA margins of 19-20% and tax rate of 22-25%.
3
21 October 2014

UPL
The management is focused on managing working capital and expects it to
remain stable at 90 days (year-end, although seasonal variances will exist).
It plans for capex of ~INR5-5.5b (including investment in registrations), as
against capex of ~INR5.5b in FY14.
Valuation and view
We are downgrading our FY15/FY16 EPS by 4%/1% to INR28.2/34.5, to factor in
for higher other expenses and interest cost.
Long term outlook remains positive with realization of integration benefits from
DVA Agro over next 3-4 quarters.
Strong volumes and revenue growth coupled with gradual realization of
synergies of DVA Agro would drive margin improvement and profit growth.
The stock trades at very attractive valuation of 11.6x/9.5x FY15/FY16 EPS and
2.2x/1.8x FY15/FY16 P/B.
Maintain Buy with target price of INR414 (~12x FY16E EPS).
Revised estimates
(INR B)
Rev
Net Sales
EBITDA
Net Profit
EPS (INR)
123.1
23.5
12.1
28.2
FY15E
Old
122.9
23.8
12.6
29.4
Chg (%)
0.2
-1.3
-3.9
-3.9
Rev
138.9
27.0
14.8
34.5
FY16E
Old
137.7
26.8
14.9
34.8
Chg (%)
0.9
0.8
-0.7
-0.7
Source: MOSL
21 October 2014
4

UPL
UPL: an investment profile
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.
Recent developments
2QFY15 had extra-ordinary expense of ~INR168m
pertaining to concluding restructuring expenses of
LatAm operations.
Valuation and view
Key investment arguments
Well diversified revenue base, with presence across
key markets viz Latam (~27% of revenues), US, EU,
India (18-20% each) and RoW (~14%).
One of the largest and most competitive global
generic players in crop protection – well poised to
leverage the increasing conversion to generics.
Improving cash flows gives it a war chest to scale up
new registrations and acquisitions.
Business is working capital intensive, thereby
restricting the free cash available to seed growth.
Any large acquisition could put pressure on short
term operating performance, especially considering
high gearing.
The stock trades at very attractive valuation of
11.6x/9.5x FY15/FY16 EPS and 2.2x/1.8x FY15/FY16
P/B.
Maintain Buy with target price of INR414 (~12x
FY16E EPS).
Sector view
Long term potential for generic agro-chemical
remains intact, benefitting from several molecules
going off-patent over next few years.
High degree of consolidation, strong entry barriers
and limited price erosion make the generics
opportunity very attractive for established players.
Companies that have achieved critical scale and
established strong relationships with major
distributors are expected to benefit the most.
Key investment risks
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
28.2
34.5
Consensus
Forecast
28.0
32.5
Variation
(%)
0.6
6.0
Target price and recommendation
Current
Price (INR)
327
Target
Price (INR)
414
Upside
(%)
26.6
Reco.
Buy
Shareholding pattern (%)
Sep-14
Promoter
DII
FII
Others
29.8
8.5
46.6
15.1
Jun-14
29.8
7.1
48.7
14.5
Sep-13
28.9
12.3
39.9
19.0
Stock performance (1-year)
440
360
280
200
120
Oct-13
UPL
Sensex - Rebased
Jan-14
Apr-14
Jul-14
Oct-14
21 October 2014
5

UPL
Financials and valuation
Income statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adj PAT
Change (%)
(INR Million)
2014
2015E
2016E
2017E
107,709 123,053 138,890 157,237
17.1
14.2
12.9
13.2
20,196 23,482 27,031 31,397
18.8
19.1
19.5
20.0
4,069
16,126
4,866
1,314
1,092
11,482
2,217
19.3
232
9,498
10,379
29.4
4,464
19,019
5,156
1,080
-190
15,133
3,015
19.9
134
12,252
12,100
16.6
4,854
22,178
4,910
1,530
0
18,798
4,324
23.0
321
14,795
14,795
22.3
5,194
26,203
4,730
1,680
0
23,154
5,557
24.0
421
18,017
18,017
21.8
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Debt/Equity (x)
2014
24.2
33.7
122.4
3.0
16.2
13.5
9.7
2.7
1.5
8.3
0.9
21.0
19.6
1.2
109.1
84.0
134.7
0.7
2015E
28.2
38.6
146.9
3.5
14.5
11.6
8.5
2.2
1.3
7.0
1.1
21.0
21.5
1.2
105.0
100.0
135.9
0.6
2016E
34.5
45.8
177.3
3.5
12.1
9.5
7.1
1.8
1.1
5.8
1.1
21.3
23.1
1.3
105.0
100.0
136.6
0.4
2017E
42.0
54.2
215.3
3.5
10.0
7.8
6.0
1.5
0.9
4.6
1.1
21.4
24.2
1.3
105.0
100.0
137.4
0.3
Balance sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2014
857
51,617
52,474
37,422
91,617
63,376
23,639
39,737
750
7,373
79,731
24,801
32,204
10,228
12,499
35,973
32,293
3,681
43,757
91,617
(INR Million)
2015E
2016E
2017E
857
857
857
62,114 75,154 91,416
62,971 76,011 92,274
33,936 31,936 29,936
98,638 109,689 123,963
68,876 73,876 78,876
28,103 32,956 38,150
40,773 40,920 40,726
750
750
750
4,297
4,818
5,439
94,672 111,137 131,746
33,713 38,052 43,079
35,399 39,955 45,233
10,389 16,007 24,050
15,171 17,123 19,385
41,855 47,936 54,698
37,084 41,857 47,387
4,770
6,079
7,312
52,817 63,201 77,048
98,638 109,689 123,963
E: MOSL Estimates
Cash flow statement
Y/E Mar
OP/(Loss) before Tax
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
15,330
0
-2,217
-7,144
7,060
-5,888
2,879
-3,009
-1,972
-4,571
0
-1,504
-8,047
-3,996
17,397
13,401
2015E
18,326
0
-3,015
-8,899
6,222
-5,500
3,076
-2,424
0
-3,486
0
-1,755
-5,241
-1,443
13,401
11,958
(INR Million)
2016E
22,122
0
-4,324
-4,766
13,032
-5,000
-521
-5,521
0
-2,000
0
-1,755
-3,755
3,756
11,958
15,714
2017E
26,667
0
-5,557
-5,804
15,306
-5,000
-621
-5,621
0
-2,000
0
-1,755
-3,755
5,930
15,714
21,644
21 October 2014
6

UPL
NOTES
21 October 2014
7

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UPL
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Analyst ownership of the stock
UPL LTD
No
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