Elara Capital

 

CMP : ₹796.25

Target price : ₹915

UPL’s (formerly United Phophorus Ltd) consolidated Q3 revenue came in at ₹4,920 crore, up17 per cent y-o-y, broadly in line with our estimates, driven largely by robust growth in Europe and Latin America, up 37 per cent y-o-y to ₹5.11 crore and 26 per cent y-o-y to ₹228 crore, respectively. Gross margin improved by a mere 30 bps to 54.8 per cent while EBITDA margin improved 88 bps y-o-y to 20.6 per cent versus our estimate 20.3 per cent. EBITDA increased 22.6 per cent y-o-y to ₹1,002 crore and was above our estimates of ₹970 crorebn. Other income fell 69 per cent to ₹37 crore and finance cost increased 82 per cent y-o-y to ₹202 crore. Consequently, adjusted PAT stood flat at ₹630 crore. The exceptional items of ₹91 crore was on account of Arysta integration cost, restructuring expenses in Latin America and litigation cost in the US.

UPL has completed the integration of Arysta on February 1. Management says over the next three years, it expects revenue synergy of $350 million and cost synergy of $250 million.

Risks: Below normal rainfall in key geographies and slower-than-anticipated synergistic benefits post Arysta integration.