Buy UPL; target of Rs 745: Sharekhan

Sharekhan is bullish on UPL has recommended buy rating on the stock with a target price of Rs 745 in its research report dated July 31, 2023.

Broker Research

August 03, 2023 / 09:59 IST

Buy

Sharekhan's research report on UPL

Q1 consolidated revenue/EBITDA declined by 17%/32% y-o-y to Rs. 8,963 crore/Rs. 1592 crore due to an industry-wide slowdown given high channel inventories and pricing pressure. However, adjusted EBITDA was 4% above our estimate, led by an 186 bps beat in EBITA margin at 17.8% (down 389 bps y-o-y) given strong seeds margin and better product mix. CPC business’ performance were hit by a steep 17%/10% y-o-y decline in volume/pricing, which led to steep revenues de-growth across geographies. UPL SAS was impacted by delayed sowing/price pressures, while seeds business posted strong performance with 26%/54% y-o-y jump in revenue/EBITDA. Management cut FY24 revenue/EBITDA growth guidance to 1-5%/3-7% from earlier guidance of 6-10%/8-12%. The new guidance would be dependent upon a recovery in H2FY24. We thus cut our FY24/FY25 earnings estimate by 6%/7%.

Outlook

Although near term challenges persists for agro-chem players but the steep fall in UPL’s stock price largely factors in concerns and valuation of 10.5x/8.4x FY24E/FY25E EPS seems attractive. Hence, we maintain a Buy on UPL but with a lower PT of Rs. 745.

For all recommendations report, click here