Buy UPL; target of Rs 850: Dolat Capital Market

Dolat Capital Market's research report on UPL

UPL’s strong 4QFY21 and FY21 performance was buttressed by a strong performance in Latin America (up 40% YoY) and a robust growth led by volumes in Europe (up 17%) and India (up 23%). Sales/EBITDA/PAT beat our estimates, with Sales growth of 14.9% YoY to Rs 127.9bn and EBITDA growth of 39.2% YoY to Rs 26.5bn. UPL reduced its gross debt by Rs 51.0bn and net debt by Rs 32.4bn in FY21. UPL, as per their guidance achieved a net reduction of 7 days in their cash-conversion cycle to 89 days. Also, over-achieved its EBITDA growth guidance by reporting an EBITDA growth of 23.3% YoY to Rs 83.5bn for FY21.

Outlook

We maintain our positive stance on UPL, and have revised our estimates. Deleveraging, resilient product pipeline and new partnerships on the anvil are mid-term re-rating triggers which compel us to increase our EV/EBITDA multiple to 8.5x. We revise our target price to Rs 850/share and remain buyers on the stock