Sharekhan's research report on UPL
UPL has carved out a strategic business unit – the Natural Plant Protect (NPP), aiming to double revenue from biosolutions to $700 million by FY24-25. The step is in line with its strategy to increase share of high growth/margin differentiated products & sustainable solutions in overall revenues to 50% by FY2026. Strong R&D pipeline (peak revenue potential of $4-4.5bn) and tie-ups with FMC and Meiji for launch of a new formulations makes us confident that UPL can achieve the higher end of long-term revenue growth guidance of 7-10%. Q1FY22 outlook - Strong mid double-digit growth for India, Latin America and Rest of World while the US and Europe may witness flat-to-moderate growth, with price hikes on cards across regions. Focus on deleveraging balance sheet to continue with a plan to further reduce debt by $500 million in FY2022.
Outlook
Robust earnings growth outlook (expect a CAGR of 22% in PAT over FY21-FY24E) would help UPL to generate robust cumulative FCF of Rs. 11,642 crore over FY22-FY24 and help further balance sheet deleveraging and drive re-rating Hence, we retain Buy on UPL with a revised price target (PT) of Rs. 930.
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