In last one year, 10 Nifty50 companies rose more than 20 percent, but only one stock posted returns of around 78 percent.
Despite poor earnings and global macro cues, United Phosphorus Limited (UPL) stock performed unbelievably well, with returns of about 31 percent returns this year alone.
In terms of valuations with its peers, UPL trades at a P/E (Price to Earnings ratio) of 22.19x while Bayer CropScience and PI Industries are trading at a P/E of 44.76x and 28.67x, respectively.
UPL's stellar gains and low valuations have attracted both foreign investors and domestic investors. The FII (foreign institutional investors) shareholding in UPL increased to 43.07 percent in June 2019 from 42.79 percent in March. During the same period, retail investors stake jumped to 15.05 percent from 3.81 percent.
Interestingly, investors are stocking up the shares despite weak global macro cues. Recently, German chemical giant BASF cut its full-year forecast and also warned that profits may fall by as much as 47 percent in the second quarter of the calendar year 2019, citing the US-China trade war and weakness in the automobile sector. The news brought jitters to UPL as it is one of the major agrochemical competitors in the market.
HSBC Research has also raised concerns on declining soybean demand, pricing pressure from the US-China trade tensions and the African swine fever (ASF).
The brokerage house said, “Soyabean demand and pricing are likely to remain under pressure due to the as-yet unresolved US-China trade tensions, events like ASF and the rising US exports to the EU and other countries, which could keep Brazil price premiums in check, unlike in 2018.”
About 35 percent of UPL’s overall revenues come from Brazil and other Latin American regions. This year, Brazil exports have already declined by 9 percent.