The agriculture sector remains the backbone of the Indian economy. While it accounts for about 15% of the GDP, it provides employment opportunities to more than half of the population. The large dependence of population on agriculture makes it politically a very sensitive sector. The consumption of crop protection products in India is quite low. India’s agrochemical consumption at 0.5 kilograms per hectare is much lower than other similar size economies such as the UK (5-7 kgs per hectare) and China (13 kgs per hectare). Therefore, optimal usage of modern agrochemicals can considerably enhance farm productivity, reduce wastage and enhance income. Moreover, they will increase the farm income, in line with the government’s target as stated earlier. On the supply side, India, with a market share of around 10%, is globally the fourth largest producer of agrochemicals.
UPL Ltd and P I Industries are leading companies in Agro chemical sector and we are expecting both companies can give superb returns over next 3-5 years.
BSE Code/ NSE: 512070/ UPL | Face Value: Rs2
CMP: Rs863 | 52 Weeks H/L: Rs878 – 537.90
Market Cap (Rs crore): 44,265 | Promoter’s holding: 27.91%
UPL Ltd has a place in the top 5 of its industry globally, targeting $7Bn revenues and a 10% market share by 2022. With its presence in 138 countries and access to 90% of the world’s food basket, the Company has disbursed around $5 billion worth of total crop solutions to the farming community worldwide. The Company has invested significantly in R&D and innovation for change, with 27 formulation labs, 48 manufacturing plants worldwide and a portfolio of 13000+ registrations. UPL has graduated from crop protection chemicals into a complete agro solutions provider (seeds, crop protection chemicals, biologicals, soil nutrients and post-harvest solutions). The Company’s basket comprises of products for multiple crops, fruits and vegetables, insulating from an excessive dependence on any one segment. The Company is the second largest post-patent global player in the crop protection market.
The Company has equity of Rs102 crore while it has huge reserve of around Rs9004 crore. FIIs hold 41.94% and DIIs hold 8.93% stake. For Q3FY19, it has recorded net sales of Rs4921 crore with PAT of Rs461 crore fetching an EPS of Rs9.05. During 9MFY19, it has recorded sales of Rs13312 crore with PAT of Rs1241 crore fetching an EPS of Rs24.37. Its EPS has grown at 21% CAGR over the last five years. Stock is trading at P/E ratio of 22 and current PEG ratio is just 1.03. During this financial year the Company has entered into an agreement to acquire Arysta LifeScience Inc (Arysta) for $4.2 billion. After the announcement UPL has given 60% return in just seven months. Stock is looking attractive for long term investment and one can buy in staggered manner for long term investment horizon.
PI Industries Ltd.
BSE Code/ NSE: 523642/ PIIND | Face Value: Rs1
CMP: Rs 908 | 52 Weeks H/L: Rs932.45 – 691.80
Market Cap (Rs crore): 12,657 | Promoter’s holding: 51.38%
PI Industries is one of India’s leading agrochemical company providing integrated and innovative solutions to its customers. PI enjoys tremendous brand recognition, a strong global presence over the years on the foundation of Trust, Integrity and IP protection. PI has exclusive rights from several global corporations for distribution of their products in India and is constantly evaluating prospects to further expand its product portfolio. The spectrum of services that PI provides to its customers are interwoven and spread across its value chain, ranging from research and development, product and application development, registration, manufacturing, marketing & distribution and customer connect initiatives. Over the past several decades, PI has worked relentlessly to provide value added solutions to millions of farmers in the country and across the globe, carving a niche for itself in the market, and leaving a lasting impact on the minds of the customers. The Company currently operates three formulation facilities and eight multiproduct plants, strategically located at its three manufacturing locations. These state of the art facilities have integrated process development teams with in-house engineering capabilities.
The Company has equity of just Rs13.79 crore while it has huge reserve of around Rs1911.04 crore. FIIs hold 13.12% and DIIs hold 18.72% stake in this company. During Q3FY19, net profit soared 33.13% to Rs107.30 crore from Rs80.60 crore in Q3FY18 on 31.58% higher sales of Rs707.50 crore fetching an EPS of Rs7.77. For 9MFY19, its PAT grew by 8.55% to Rs283.40 crore from Rs261.08 crore on 20.94% higher sales of Rs2036.10 crore fetching an EPS of Rs20.54. Its EPS has grown at 36% CAGR over the last five years. Stock is trading at P/E ratio of 34 and current PEG ratio is just 0.94. Stock is looking attractive for long term investment and one can buy in staggered manner for long term investment horizon.