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Prabhudas Lilladher has recommended a "buy" on the stock of UPL Ltd for solid gains. The broking firm sees solid gains. At the time of doing the brokerage report, the stock of UPL was trading at Rs 757, and is now currently trading at Rs 740.
Buy the stock of UPL for a price target of Rs 1070
Prabhudas Lilladher has set a price target of Rs 1070 on the stock of UPL, which means an upside potential of almost 44% from the current levels. According to the brokerage net debt declined Rs 9.8bn QoQ. "As on December 31, 2022 net debt stood at Rs305.1bn (including perpetual bond of Rs29.9bn, considered as equity), up Rs37.6bn YoY, however down Rs9.8bn QoQ. Robust cash flow generation (Rs 50.7bn in 9MFY23) coupled with additional cash inflows due to restructuring of business has resulted into sequential decline in debt in 3QFY23," the brokerage has said.
Unchanged price target on the stock of UPL
UPL remains confident to achieve upper limit of its Revenue and EBITDA growth guidance of 12-15% and 15-18% in FY23E, with growth largely driven by focus on differentiated solutions and new product launches, Prabhudas Lilladher has said. "The company also expects to reduce its debt by USD500mn YoY in FY23E (USD1.3bn sequentially) led by a) better operating performance in subsequent quarter; b) release of working capital and c) recent restructuring of business verticals resulting into net cash inflow of USD259mn. We expect Revenue/PAT CAGR of 12%/17% over FY22-25E. Maintain 'BUY' with unchanged target price of Rs 1070 based on 14XSeptember FY24E EPS," the brokerage has said.
Margins under pressure due to inflationary raw materials cost
According to Prabhudas Lilladher, EBITDA margins contracted by 140bps YoY to 22.2% (PLe 22.5%) led by lower gross margins coupled with higher other expenses. Forex loss in finance cost and other income stood at Rs630mn in 3QFY23 vs Rs2.29bn in same quarter last year. Adjusted PAT came in at Rs11.03bn (PLe Rs11.3bn). Exceptional item of Rs200mn (net of tax Rs164mn) is towards loss on account of fire in plant, restructuring cost in Europe and litigation cost.
The stock of UPL Ltd was last seen trading at Rs 740.20 on the Bombay Stock Exchange.
Disclaimer
The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.
