Buy UPL; target of Rs 736: KR Choksey

KR Choksey's research report on UPL

UPL numbers beat our estimates across the board. Revenue beat (+2.8%) due to strong volume and price growth, EBITDA beat due to lower-than-expected employee expenses, and Adj. PAT beat was due to reduced interest cost and one-time tax benefit. We increase our FY26E and FY27E estimates by 1.5% and 7.2% to INR 49.9 and INR 61.3, respectively showing our confidence that strong volume growth coupled with stable pricing trends, and reduction in interest cost from rights issue and Advanta stake sale. With normalized inventory levels across major markets the company is well-positioned to sustain the growth momentum.

Outlook

We roll over our valuation multiple to FY27E and assign a PE multiple of 12.0x to arrive at a target price of INR 736 (previously: INR 591) reflecting a shift towards higher-margin and differentiated products particularly in Europe and Brazil to support profitability and upgrade our rating to “BUY” from “ACCUMULATE” on the stock.