Buy This Crop Protection Stock For Good Upside, Says Sharekhan

Broking firm Sharekhan is betting on the stock of UPL Ltd for good returns. The firm believes that the stock has the potential to reach Rs 930 from the current levels.

Buy with a target price of Rs 930

Current market price	Target price	% gain likely
Rs 762	Rs 930	22%

According to Sharekhan UPL, is a likely beneficiary of the recent sharp surge in international crop prices (wheat/ soybean/corn indices rose 13%/17%/11% m-o-m in February 2022). This would help the company to continue hiking product prices and improve margins despite elevated raw material/logistics costs (with the benefit of backward integration).

Investment in digital platforms to aid penetration of value-added products

According to Sharekhan, UPL is investing in technology and has already launched nurture.farm for Indian farmers (onboarded 1.4 mn farmers and 60,000 retailers).

"These initiatives would transform UPL from a product company to an agrochemical service provider (cater to entire value chain staring from sowing to harvesting and allied services including credit solutions). Currently, the nurture.farm platform is only in India but can be expanded to international markets and the same could drive value unlocking in long term UPL. Additionally, UPL has 15 new molecules (largely in differentiated and sustainable solutions category) under development pipeline (with estimated risk adjusted revenue potential of $2.5 billion) and digital technology would help improve demand for value-added products," the brokerage has said.

Financial estimates as per Sharekhan (Rs Crores)

	FY 2022	FY 2023
Sales	42,563	46,820
OPM	22.80%	23.60%
Adjusted PAT	4,164	4,819
EPS	Rs 54.4	Rs 63

Value added products to drive EBITDA

"The management's focus on raising the revenue share of differentiated products (value-added agro-chemical products) and sustainable solutions (BioSolutions) to drive up EBITDA margin to 23.9% in FY24E as compared to 21.6% in FY21. Investment in technology (digital platform nurture.farm) would drive demand for value added products and create long term value. We maintain Buy on UPL with an unchanged price target of Rs. 930," the brokerage has said.