Sharekhan has given Buy recommendation for UPL with a target price of Rs. 632 in its research report issued on Jan 29, 2021

Sharekhan’s research report on UPL

Revenue growth was weaker than expected at 2.6% y-oy to Rs. 9,126 crore (5.2% below our estimate) due to forex impact in Latin America. However, adjusted EBITDA margin was strong at 24.6% (up 135 bps y-o-y) 259 bps above our estimates led by improvement in gross margins at 44% (up 230 bps y-o-y). We expect UPL to beat its EBITDA growth guidance of 8-10% for FY2021 given a strong 16% y-o-y growth for EBITDA in 9MFY2021 and expectation of a seasonally robust Q4FY21 for high margin Europe/North America regions. Focus on reducing net debt/EBITDA to 2x by March-21 is encouraging and efforts towards debt reduction (given likely strong cashflow generation in Q4FY21) could allay concerns of high leverage and help re-rate stock.


We expect a CAGR of 16% in PAT over FY2020-FY2023E, which would help generate cumulative FCF of Rs. 12,850 crore over FY2021E-FY2023E and help deleverage balance sheet. We retain a Buy with an unchanged PT of Rs. 632.

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