Target: ₹852
CMP: ₹789.90
Strong volume growth and market share gains resulted in higher y-o-y growth of international business; India business grew 62.6 per cent y-o-y, gross and EBITDA margin were up 369 bps and 78 bps y-o-y respectively. Europe business grew only 2 per cent y-o-y due to adverse impact from Russia-Ukraine conflict.
Led by continuous ESG initiatives, UPL was included in the S&P Global Sustainability Yearbook 2022. We upgrade our earnings estimates due to: better-than-expected performance in Q4FY22; and expected reduction in finance costs and higher margins.
We model UPL to report revenue and PAT CAGR of 9.3 per cent and 18.1 per cent, respectively over FY22-24, and RoE to move to 18.5 per cent in FY24 from 19.8 per cent in FY22. We remain confident of value creation with RoCE greater than cost of equity.
We maintain ‘Add’ rating on the stock with a DCF-based target price of ₹852 (implied P/E 11x of FY24E EPS).