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Last Updated : May 01, 2018 05:55 PM IST | Source: Moneycontrol.com

Despite gaining over 400% in 5 years, a brokerage sees this fertiliser stock rising more

In its report, Phillip Capital stressed on the fact that the company is the largest off-patent Indian player in its sector and has an increased focus on exports.

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UPL, previously known as United Phosphorus, is likely to be on investors’ radar after Phillip Capital initiated coverage on the stock with a price target of Rs 950.

The brokerage's price target implies that stock could appreciate as much as 24 percent from its current market price.

Between April 2013 and now, UPL has managed to return over 418 percent, which points to a healthy uptrend.

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The brokerage highlighted that the chemical manufacturer is likely to benefit from a global recovery.

It sees the company competing with global majors based on its unique sales and marketing-focused business model, and robust research and development capabilities, to churn out high‐quality crop‐specific products.

UPL will likely also benefit from the transformation in domestic consumption dynamics, aided by revisions in government policy.

In its report, Phillip Capital stressed on the fact that the company is the largest off-patent Indian player in its sector and has an increased focus on exports.

"This, coupled with strong R&D and manufacturing, allows it to churn out innovative combination products, target spectrum products, and extension of molecules into new crops. It has a strong domestic footprint and has expanded its global reach, targeting ideal markets after evaluating the demand for its products," analysts at the brokerage wrote in their report.

They also wrote about how the company was poised to compete with global majors on their turf, backed by strong research and development and a grip on technology.

"It is the firstmover in the ‘proprietary’ off‐patent space; so, it is capable of addressing this space quicker than its peers. This opens up a potential opportunity of US$ 2.5‐4.0bn worth of patents expiring by FY21," the analysts added.

Outlook and Valuation

Phillip Capital said that with the right strategy and investments in place, UPL has built strength, thereby de-linking external dependencies, and is set to find new horizons to grow its business.

"With better cash‐flow generation, its acquisitions paying off strongly and reduced interest burden through better debt instruments, we expect UPL to deliver profit CAGR of about 25‐27 percent, with a recovery in EBITDA margins to about 19 percent from 17 percent in FY18, in the next three years," the brokerage said in the report.

UPL on Monday closed at Rs 731.65 on BSE, down 3.00 percent from its previous closing price.

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First Published on May 1, 2018 08:56 am
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