Morgan Stanley
UPL (Overweight)
Target ₹951
CMP: ₹763.8
We incorporate the strong volume growth reported by UPLin Q2-F22and strong commentary on H2F22. We revise up our revenue, EBITDA and PAT forecasts by 4-7 per cent, 4-7 per cent and 9-12 per cent, respectively.
For F22, we forecast revenue and EBITDA growth of 11.7 per cent and 16 per cent which is higher than management guidance of being at the higher end of 7-10 per cent and 12-15 per cent growth respectively.
Although the market continues to face supply chain constraints, we believe UPL is favourably placed before the busy H2season commences as it is backward integrated in key molecules.
The outlook comments by global crop protection companies are positive as higher acreages and higher soft commodity prices look set to drive stronger farm incomes, which in turn supports stronger volume growth for crop protection.
UPL’s positioning on differentiated and sustainable products should drive share gains and stronger earnings growth.
UPL trades at a steep discount of about 20 per cent and 5 per cent on one-year forward consensus PE and EV/EBITDA, respectively, compared to its global peers.
While Morgan Stanley affixed the base case price target is ₹951, for bull and bear cases, it price target of ₹1,296 and ₹642.