Ticker : UPL / 512070
ISIN : INE628A01036
Industry analysis : Agriculture plays one of the key role in India GDP. More than 55% Rural population. Agriculture products made part of 4th largest exported principal commodity wth 10% share. (from here ) It it more then US $ 260 Billion industry with all its allied Sector like Chemical, Tractor and other. As like any other big size sector, agriculture also growing with slow speed. CAGR 3.3% in last 5 Years.
India is known for its spices and related products. The production of Fruit makes us second largest producer.
As the industry is large and bug part of population is depending upon it, there is a big market for Agrochemicals.
Globally the demand for food production is ever increasing for feeding the increasing population. Due to many reasons, the land under agriculture is reducing and so the need for higher productivity is also growing. It is important to protect crops for high yield from agriculture land. There are many hurdles in the path and for that Farmer need to use different tyep of chemical. Interestingly India is among lowest level of usage of crop protection per hectare. Lower then 2% global usage when Global Crop protection Chemical Market is expected to reach US$ 69000 million in 2019 with CAGR 5.5%. So needless to say, there is big market waiting for the companies Which are perfect place.
UPL is one of them.
Company analysis : The company is leader in the sector with 17% CAGR in last 5 year which make them Globally one of the fastest-growing, the company has presence in 122 County with 15 production unit in India a d 13 in abroad. Operating through 76 Global subsidiaries. Latin American countries are biggest market for Company. The company having diversified products for all over the world and it mkethem one of the large portfolio base with reduced Risk. But still the company is under penetration. Over the year,company achieved vertical Diversification and also operating in industrial chemical production. Around 16% revenue.
Above everything else, big plus is the high barrier of entry in sector. And still cost per unit production is very low. But as the problem with Subsidy on Fertiliser, public Sector companies are not looking very attractive. Switch cost is high as when farmers generally don’t change and when they change they need expert advice which is not easy and cost effective in many part of India.
All the aspects above mentioned Make it Good buy…
The company declared Merger of Advanta. Group company. The Synergy and expecting to save ₹90 Cr per year. It also increase the product portfolio and give access to agri value Sector to UPL. Till the date CCI, NSE, BSE and Gujarat high court.
Financial Performance :
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Revenue 3064.6 8 3459.49 4073.76 5286.11 5532.65 6117.77
Net Profit 157.50 227.04 208.13 415.7 3 463.3 3 705.71
Net Profit Margin 5.41 6.86 5.28 8.36 8.68 11.79
EPS 3.52 4.92 4.60 9.45 10.81 16.47
Book Value 48.90 75.92 75.87 77.17 82.22 93.69
Dividend per Share 2 2.5 2.5 4 5 5
ROE 6.97 6.47 6.19 12.56 13.14 17.57
ROCE 4.71 9.76 13.76
ROA 2.69 3.62 2.96 5.87 6.06 8.47
Debt to Equity 0.64 0.41 0.61 0.35 0.35 0.34
Asset Turnover 49.64 52.80 56.15 70.14 69.83 71.83
Dividend Payout 58.80 50.85 53.06 41.23 46.25 30.36
Future Prospects : The company is operating in Important Sector and doing everything right. The growth in Topline and NPM looking attractive. There is issue with debt But it will not become issue as the operating profit sufficiently covers it.
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