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The stock of UPL Limited, formerly United Phosphorus Ltd, zoomed 10.5 per cent in intra-day trade on Friday after the company came out with a strong set of Q4 numbers. Following the stellar show, analyst turned more bullish on the NIfty-50 index stock by raising price targets.
Foreign brokerage CLSA, which raised the price target to ₹900 (from earlier 740) said UPL beat FY21 revenue/EBIDTA growth guidance but missed debt-reduction guidance by ₹700 crore. “FY22 was guided for 7-10 per cent revenue growth and 12-15 per cent EBIDTA growth YoY, better than our expectations”.
The company’s consolidated profit grew 74 per cent year-on-year to ₹1,361 crore for the March quarter as against ₹784 crore reported in the year-ago period. Revenue grew 15 per cent at ₹12,797 crore (₹11,141 crore).
The stock, which recorded a fresh 52-week high of ₹764.60 on the NSE, closed at ₹743.30, up 7.47 per cent over the previous day’s close.
In better position
While net debt declined to $730 million in the quarter, it could have been slightly better given the positive earnings momentum and sharp Working Capital reduction (nine days reduction YoY), said JP Morgan. “We see the company well-positioned to gain in the current environment supported by strong crop prices, which could continue to drive net debt reduction in FY22, the foreign brokerage, which increased the target price to ₹760 (₹630 earlier), said.
‘Formidable global force’
According to IIFL Securities, UPL is a formidable global force now. "Over the longer term, growth will be driven by new product launches, continuing cross-selling synergies from the Arysta merger, and introduction of sustainable solutions under the OpenAg platform. Expansion in margins will be led by focus on higher-margin differentiated products, increasing cost synergies, selective price hikes and fixed cost management, said IIFL..
Sustained focus on the move to differentiated product solutions and a more comprehensive offering to farmers from seed to post harvest care has helped improve pricing power and that reflects in higher realisations over the year, said Centrum Broking. UPL prospects remain very strong over the next few years, it added. Management remained confident about robust global demand for agrochemicals, driven by multi-year high crop prices. Higher crop prices should allow the industry to raise prices to pass on higher raw material and transportation costs.
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