Thread by @alphaspotcap

UPL Ltd Analysis!🇮🇳

A detailed thread 🧵👇🏻
#investing #StockMarket

(1/20)

About:

Incorporated in 1969, UPL manufactures, markets, & distributes crop protection products, intermediates, speciality chemicals & other industrial chemicals.

UPL ranks among the Top five generic agro-chemical companies in the world.

(2/20)

Crop Protection Market:

The crop protection market is directly correlated to agricultural production. India is the world’s 5th largest agrochemical market. With the market size of ~$3.3Billion. It also has the fastest growth rate amongst the top 20 markets (~9%)

(3/20)

Markets of UPL:

• Asia Pacific: 31% market share
• Latin America : 26% market share
• Europe : 21% market share
• North America : 18%
• Africa : 4% market share

• Herbicide Market : 46% share
• Insecticide Market : 26% share
• Fungicide : 28% share

(4/20)

UPL capacity:

• 20+ R&D facility
• >2.5% of the annual revenue is reinvested into R&D
• India : 15 Plants
• Europe : 10 Plants
• Latin America : 9 Plants
• Rest of the World : 9 Plants
• 15 new molecules in development
• Innovation Rate : 21.8%

(5/20)

Key Collaborations:

• With FMC to gain early access to Chlorantraniliprole (CTPR)

• With Telesense for their innovative postharvest digital solution

• With the Soil Health
Institute, which will help develop
the right solutions for farmers &
enhance soil health.

(6/20)

Core Brands in India:

• Insecticides, Herbicides, Fungicides-

Ulala | Panama | Phoskill | Lancer Gold | Starthene | Saathi | Iris | Patela | Sweep Power |
Ferio | Eros | Saaf | Avancer Glow | Delma | Cuprofix

• BioSolutions-
Opteine | Gainexa | Macarena | Copio

(7/20)

Sustainability & Governance:

• #1 Global ranking in the agrochemical sector for ESG risk management

• Inclusion in DJSI Sustainability
Yearbook 2021

• BBB Rated by MSCI ESG

• 50% Independent Directors for UPL Ltd

(8/20)

Performance:

While the agrochemical market has grown in low single digits over the years, UPL has delivered
growth rates with revenue & EBITDA growing at 21% & 26% over the last five years. They also brought the net working capital cycle to the lowest in last few years.

(9/20)

Strongpoints:

• Large scale with diverse geographical presence and wide product portfolio:

UPL’s revenue base is well diversified, with ~70% generated from LATAM, Europe,
& the US. This base reach reduces susceptibility to cyclicality in demand from any one region.

(10/20)

Business risk profile:

Risk profile remains healthy, aided by a portfolio of 13,000+ registrations, over 200 active ingredients & 1000+ patents. The group is present in 138 countries with 48 manufacturing plants, employing more than 10,400 people across the globe.

(11/20)

• Backward integration & supply-chain management :

Large portion of raw material & power requirement is met in-house, which assures a steady supply, with lesser price volatility.

The robust supply chain & distribution network has kept the operating margin heathy.

(12/20)

• Synergistic cost savings of about USD 200 million in fiscal 2021:

Due to better backward integration, personnel and non-personnel cost savings resulted in significant cost saving, leading to operating profitability of over 22% in fiscal 2021 vs 19.9% in FY20

(13/20)

Focus on High Margin products:

The company has several products with margin level of 30%+. And this is where they want to focus on going forward. The overall OPM of UPL is around 22% which the company is expecting to increase even higher using this strategy.

(14/20)

Financial Commentary:

UPL has been reducing its debt over the last 2 years which has led to gradual improvement in financial risk profile. The company reduced its gross debt by ~₹4,800 crore supported by strong operational cash generation & partial pre-payment of debt

(15/20)

UPL’s management is committed to reducing debt levels further over the medium term. Along with strong operating performance & continuing healthy cash flow generating ability, net debt to EBITDA is expected to reduce to below 2.4x in fiscal 2022 & 2x in fiscal 2023.

(16/20)

Key risks:

Large working capital:

UPL’s business is seasonal in nature. Sales occur at the start of the season, but payment is realised post-harvest. As goods are manufactured at one place & distributed to other place, sizeable stock of goods needs to be maintained.

(17/20)

The sector remains susceptible to separate legal processes in different countries. Change in regulatory requirements in countries where the company has significant exposure, could weaken growth prospects. The sector is also dependent on monsoon and level of farm income.

(18/20)

Shareholding Pattern:

• Promoters : 28.45% (Low)
• FIIs : 35.30%
• DIIs : 17.80%
• Public : 18.45%
•

(19/20)

The UPL group’s business profile has improved significantly by the acquisition of Arysta, making it the 5th largest player globally. Better business synergies & product mix helped improve sustain operating profitability at over 20-22%, benefitting cash generation.

(20/20)

How bullish are you on the Agrochem sector?

@caniravkaria @stockifi_Invest @VRtrendfollower @kuttrapali26 @MadhusudanKela