Broker's call: UPL (Neutral)

| Updated on August 01, 2019

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.

Published on August 02, 2019

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor