United Phosphorous or UPL surged in trade after the company informed the exchanges that its factories around the world remain operational and that the company has adequate raw material inventory to meet production requirements until April 2020.

The company, which manufactures and markets agrochemicals, says that the multi-sourcing strategy for active ingredients and raw materials also helps in hedging supply risks. The management has highlighted that it is geared to meet the robust demand in North America and Europe to enter the peak cultivation season. Also, as the new season kicks off, the management expects inventory levels to normalise resulting in improved cashflows.

UPL has a diversified exposure to regions like India, Latin America, Europe, North America and the rest of the world and the company says that global presence with full portfolio offerings in many crops has helped the Company respond to upsides and downsides directly related to the impact of COVID-19.

Agri inputs tend to be relatively defensive due to their non-discretionary nature (~14 percent of overall farmer spends). Analysts say Indian contract manufacturers may also benefit from growth coming from new plants being commissioned.

The stock has almost fallen 40 percent since the start of this year due to fears around COVID-19 and debt impacting the company’s business. The stock is also trading at reasonable valuations at 10X FY21EPS