Emkay Global Financial's report on UPL
UPLL delivered a stellar Q4 performance, beating consensus topline/EBITDA/Adj. PAT estimates by 11%/8%/12%. The robust performance was aided by strong double-digit growth across geographies, except for Europe, which registered a modest 2% YoY growth. Q4 revenue grew by 24% YoY, backed by 3%/19%/2% growth in volume/pricing/forex. Amid significant and sustained RM inflation, gross margins displayed exemplary robustness, expanding by 370bps YoY on the back of a substantial moat of supply chain efficiency, backward integration, and pricing power. Operating margins, however, witnessed a relatively modest expansion of 59bps YoY due to employee and other opex increasing by 39.4% and 39.1% YoY, respectively. Adj. PAT grew by 35.3% on lower tax outgo and higher other income despite depreciation and interest growing by 11.5% and 90% YoY, respectively.
We have revised our revenue estimates in line with RM cost inflation (pass-through) but kept EBITDA estimates largely unchanged. Consequently, we revised our revenue/EBITDA estimates by 4.7%/0.2% for FY23 and 4.6%/0.1% for FY24. However, considering higher-than-expected net debt levels and interest thereon, we have cut EPS estimates by 2.6%/0.8% for FY23/FY24. We maintain a Buy rating with a revised Mar’23E TP of Rs930 based on DCF.
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