Hold UPL; target of Rs 562: ICICI Securities

ICICI Securities research report on UPL

UPL reported a weak Q2FY24 primarily on channel destocking and higher pricing pressure. All segments reported revenue decline YoY. However, differentiated and sustainable product portfolio posted volume growth of 11% YoY. Also, the seed business recorded 10% revenue growth YoY. Management indicated a relatively better H2FY24 primarily on (1) start of crop season in key operating regions, (2) reduction in high-cost inventory and (3) reduction in channel destocking. Also, management indicated volume growth to improve from Q4FY24.

Outlook

However, it has further reduced its overall annual guidance. We cut our earnings sharply to factor in subdued H1FY24, lower guidance and prevalent industry headwinds. Downgrade to HOLD (from Add) with a revised DCF-based TP of INR 562 (implied FY25 P/E: 13x; earlier TP: INR 673).