Buy UPL, target price Rs 910: Emkay Global

Emkay Global has buy call on UPL Ltd. with a target price of Rs 910. The current market price of UPL Ltd. is Rs 784.1. Time period given by analyst is one year when UPL Ltd. price can reach defined target.

UPL Ltd., incorporated in the year 1985, is a Large Cap company (having a market cap of Rs 59859.14 Crore) operating in Pesticides/Agro Chemicals sector.

UPL Ltd. key Products/Revenue Segments include Agrochemicals, Other Operating Revenue, Export Incentives, Royalty Income, Sale of services for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 10614.00 Crore, up 23.95 % from last quarter Total Income of Rs 8563.00 Crore and up 17.75 % from last year same quarter Total Income of Rs 9014.00 Crore. Company reported net profit after tax of Rs 764.00 Crore in latest quarter.

Investment Rationale
The brokerage assumes coverage on UPL Ltd with a Buy rating and a Mar’23E TP of Rs910 (upside 19%). The fair value is derived using a two-stage growth model and implies target EV/EBITDA and P/E multiples of 8.5x and 12.5x, respectively, on FY24 estimates. The Buy thesis is underpinned by : 1) ~8% FY22E-25E revenue CAGR, driven by ~19% CAGR in Differentiated and Sustainable (D&S) solutions; 2) EBITDA margin expansion from 22.5% in FY22E to 24.1% in FY25E, supported by innovative products; 3) ~18% PAT CAGR over FY22E-25E, supported by EBITDA margin expansion and lower interest outgo; and 4) substantial netdebt reduction from Rs166bn in FY22E to Rs32bn in FY25E from healthy cashflow generation. Further upside risk stems from the monetization of UPL’s fast-growing specialty chemicals business (~Rs45/ share, potentially) and nurture.farm initiative. Downside risks: 1) adverse agronomical conditions in key markets; and 2) adverse forex fluctuations.

Promoter/FII Holdings
Promoters held 27.96 per cent stake in the company as of 30-Sep-2021, while FIIs owned 35.13 per cent, DIIs 17.97 per cent.