Dolat Capital recommended accumulate rating on UPL with a target price of Rs 880 in its research report dated April 30, 2018.
Dolat Capital's research report on UPL
Net sales grew by 7% to ` 56.9bn lower than our estimate by 6%. Volume growth during the quarter was 8% and exchange impact of -1%. Adjusted EBITDA grew by 9% to ` 12.2bn higher than our estimate by 3%. PAT de-grew by a percent to ` 7.4bn. North America, Latin America and Europe grew by 7% while India and RoW grew by 6% and 5% respectively. In FY18, industry witnessed a de-growth of 0.2% while UPL outperformed the industry with a 7% growth and constant currency growth of 9%. UPL outperformed the industry for the 3rd consecutive year.
Outlook
The management has guided for 10-12% growth in FY19 and 12-15% EBITDA growth and a capex guidance of ` 15bn. We believe UPL should be able to grow by 12% CAGR over FY18-20E supported by growth in India and LaTAm and we expect earnings CAGR of 16% over the same period. UPL is one of the best backward integrated agrochemical play with a 4% global market share and strong RoCE profile of 22%. Valuations attractive at 16x and 14x FY19E and FY20E. We maintain Accumulate with a target price of ` 880 (16x FY20E EPS).
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