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Motilal Oswal
UPL (Neutral)
CMP: ₹576.9
Target: ₹630
UPL’s revenue (including Arysta) rose 91 per cent y-o-y to ₹7,910 crore (our estimate: ₹8,190 crore) in Q1 FY20. However, on a like-to-like basis (i.e., including Arysta in Q1 FY19), revenue was up 7 per cent y-o-y (volume growth: 5 per cent, price growth: 1 per cent and exchange gain: 1 per cent). Reported EBITDA was up 47 per cent y-o-y to ₹1,250 crore (our estimate: ₹18b; +11 per cent y-o-y on a like-to-like basis). Adjusted PAT declined 13 per cent y-o-y to ₹4.9b (our estimate: ₹810 crore).
Key concall takeaways: i) Maintained guidance of 8-10 per cent revenue growth and 16-20 per cent EBITDA growth for FY20; ii) Debt increased by ₹795 crore q-o-q due to $90 million payout on account of increased working capital in Arysta and $13-14 million payout for Biopen, an acquisition in Costa Rica.
Valuation view: We cut our earnings estimate by 2 per cent/9 per cent for FY20/21 to factor in higher depreciation and interest cost. High debt remains a key concern owing to the Arysta acquisition (significant rise in net D/E from 0.4x in FY18 to 1.8x in FY19). We value the stock at 14x FY21E EPS (about 10 per cent discount to its five-year average trading multiple, mainly due to its highly leveraged balance sheet). Our target price of ₹630 implies a 6 per cent upside.
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