Sharekhan has given Buy recommendation for UPL with a target price of Rs. 930 in its research report issued on Dec 13, 2021

Sharekhan’s research report on UPL

Potential market share gains given a global scale, backward integration and focus on high growth bio-solutions space would drive industry leading volume/revenue growth for UPL over FY22E-24E; expect it to beat FY22 revenue growth guidance of 7-10% given H1FY22 growth of 14% y-o-y and as H2 is normally a strong growth period. Differentiated & sustainable solutions would be a key growth driver as this segment is growing at 15-20% rate and its gross margins are ~1,000-1,500 bps higher than that of normal products. Thus, management’s aim to increase share of differentiated & sustainable solutions in to 50% by FY26, which would drive margin expansion to 24-25%. We expect UPL’s EBITDA to clock a 14% CAGR over FY21-24E and generate cumulative FCF of Rs. 11,642 crore over FY22E-24E, which would help UPL to further deleverage its balance sheet (management target of net debt/EBITDA target to <2x by March’22).


A 14% fall in UPL’s stock price from 52-week high makes risk reward favourable given attractive valuation of 11.7x/10.1x FY23E/FY24E EPS considering improving earnings profile (higher margin and RoE) and management focus to strengthen balance sheet. Hence, we maintain our Buy rating on UPL with an unchanged PT of Rs930.

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