Buy UPL; target of Rs 622 KR Choksey

KR Choksey's research report on UPL

UPL Ltd reported consolidated Revenue growth of 14.4% YoY (up 14.1% QoQ) to INR 89.4 bn. EBITDA for the quarter grew 15.2% YoY (down 9.0% QoQ) to INR 16.7 bn while EBITDA margin remained flat YoY at 18.6% (-474bps QoQ) in Q2FY21 (from 18.5% last year). Company reported Net Profit growth of 179% YoY (down 16.0% QoQ) to INR 4.6bn. Adjusted for exceptional items, Adjusted Net Profit grew 43.1% YoY (up 17.0% QoQ) to INR 6.7bn. Reported NPM for the quarter came in at 5.2% (+300bps YoY, -185bps QoQ) while Adjusted NPM stood at 7.5% (+151bps YoY, flat QoQ). Exceptional Items for the quarter mainly include cost related to restructuring, severance and litigation costs related to the Group's business in the Europe and Latin America.

Outlook

Accordingly, we maintain our “BUY” rating on the stock. The potential downside to our recommendation in near term arises from the resignation of company’s auditors at UPL Corp & allegations regarding director numerations.

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