Continuing market share gains and new products to help the firm post better set of numbers; research firm sees falling stock price as an opportunity to buy it now.
Deutsche Bank is upbeat on UPL on the back of improvement in revenue growth due to new product approvals. The research firm has a buy call on the stock with a target price of Rs 850.
The stock has underperformed the Sensex in the past three months. However, the research firm senses an opportunity here. “We see this underperformance as an additional opportunity to buy the stock as we remain confident of 24 percent EPS CAGR over FY17-19e,” it said in its report.
On new products, UPL has received nods for an extension of fungicide to wheat and barley and its insecticide Perito to fruits and vegetables. “Both of these are proven blockbuster products for UPL in Brazil and we estimate these contribute 60 percent to UPL’s Brazil revenue of USD 500 million,” it said in a report. The company’s future product launches is also making the research firm bullish on the stock.
While the revenues will set to be weaker in this fiscal, going forward, it sees a pick up during the next fiscal.
“While the quarter is not over yet, trends so far indicate that revenue growth will likely be weaker at 7-8 percent in Q4FY17 versus 18 percent in Q3FY17 in part due to high base effect as UPL had reported a 25 percent volume growth in Q4FY16. However, we expect revenue growth to pick up thereafter driven by new products as well as continuing market share gains in existing products. We forecast 12 percent CAGR in revenue and 24 percent CAGR in EPS estimates over FY17-19,” it said in its report.
Meanwhile, the research firm feels that the company is well positioned for impending competition on soybean fungicides.
“Recent investor interactions suggest rising concern on impending competition in UPL’s soybean fungicides portfolio in Brazil, a segment which has been the key driver of its more than 50 percent revenue CAGR in that country in the last two years. With new mancozeb mixtures and enhanced direct distribution reach, UPL is well positioned to meet this likely increase in competition,” it said in a report.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.
First Published on Mar 9, 2017 04:52 pm