Prabhudas Lilladher is bullish on UPL has recommended buy rating on the stock with a target price of Rs 606 in its research report dated October 31, 2020.
Prabhudas Lilladher's research report on UPL
UPLL’s 14% topline growth (PLe 13%) & 15% EBITDA growth (PLe 15%) was in line with our estimates. APAT @ Rs6.7bn (PLe @ Rs 4.7 bn) up 43% came in better due to lower than expected depreciation (due to restatement) & tax rate and higher than expected other income. Q2 saw broad-based growth in all geographies driven by market share gains, improved supply chain and robust agronomic conditions. UPLL’s strong business momentum indicates its solid competitive positioning and successful integration of Arysta. Its rich product pipeline, bio solutions portfolio, focus on higher value branded products and cross selling opportunities will drive volume growth while margin expansion will be driven by expanding cost leadership status across product lines and integrated related synergy benefits. In the short term, LatAM’s forex volatility may eat into the gross margin expansion seen in other geographies.
While the management has maintained 6-8% topline growth and 10-12% EBITDA growth guidance, we expect UPL to beat the same on the EBITDA front (PLe FY21 EBITDA growth @ 17.5%). Maintain BUY with target price of Rs606 based on 7x Sep’22 EV/EBITDA (Implied P/E- 11.5x).
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