Accumulate UPL; target of Rs 684: KR Choksey

KR Choksey's research report on UPL

In Q1FY24, UPL’s revenue de-grew -17.2% YoY/-45.9% QoQ to INR 89,630 mn. The de-growth in revenue was led by declining product prices, de-stocking of channel inventory build up and planting season delays which resulted in sluggish growth in revenue. EBITDA has seen a de-growth of -38.7% YoY and -51.5% QoQ which stood at INR 13,360 mn. Clearance of higher cost inventory, led to the contraction in EBITDA margin by -172 bps QoQ/-523 bps YoY to 14.9%. PAT saw a decline of -81.1% YoY/-79% QoQ and stood at INR 1,660 mn. PAT margin contracted sharply by -625 bps YoY/-293 bps QoQ to 1.9%.

Outlook

At CMP of INR 620, UPL is trading at a P/E of 13.7x/10.9x to its FY24E/FY25E EPS of INR 45.2 and INR 57.0 respectively. After factoring in weak performance in Q1FY24 results and revised guidance at the lower end, we are revising our FY24E/FY25E estimates. For valuing UPL, we assigned P/E multiple of 12x, implying a target price of INR 684 per share (Previously 876), yielding an upside potential of 10.3% from the CMP. Accordingly, we changed our rating from ‘BUY’ to ‘ACCUMULATE’ rating on the shares of UPL.