LKP ‘Likes’

January 19, 2015 LKP Advisory

UPL Ltd. Buy, Target Rs.450 TECHNICAL VIEW

United Phosphorus Ltd - UPL is the fifth largest generic crop protection company
globally and the second fastest growing with large product registrations across
multiple markets.
UPL daily price chart typifies a rounding bottom formation. Rounding bottom formations
which last multi-years generally are a sign of turnaround stories for the stocks.
Levels of 210 had been acting as resistance for almost 7 years, right from 2007
onwards till 2014!!

Given its ability to grow earnings at a CAGR of 20 percent over the next 3 years with
sustainable EBIDTA margins of 20 percent at an ROE of more than 20 percent we
believe UPL should trade higher than 11x estimated one year forward earnings.
Although absence of product level granular details across multiple markets makes
forecasting a challenge, the sheer size and valuation comfort makes UPL a
compelling story as it shall use free cash flows to retire debt and drive improvement
in capital efficiency. Recommend Buy.
However, post the breakout in year 2014, the stock has risen sharply. The volumes on
the breakout was notably extremely high, thereby lending added confidence on the
breakout point. We believe that this current period of consolidation(shown as dotted
circle), syncs well with the longer term chart structure and once this consolidation gets
over, the upmove would most likely resume. We Recommend Buy a Target price of
Rs.450.

BSE / NSE Code 512070 / UPL

Current Market Price (Rs.) 371
BSE Sensex / CNX Nifty 28,262 / 8,550
Market Cap (Rs crore) 16,429
52-Week Range (Rs) 388 / 177

Shareholding Pattern
Promoters (%) 29.80
FII Holding (%) 46.47
DII Holding (%) 8.62
Public & Others Holding (%) 15.11
Kunal Bothra S. Ranganathan
kunal@lkpsec.com s_ranganathan@lkpsec.com
91 22 6635 1213 91 22 6635 1270

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