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UPL Shares Rally As Analysts Cheer Third-Quarter Performance

Brokerages, including Jefferies and Motilal Oswal, said benefits from Arysta’s acquisition aided UPL’s operational performance.

A person spreads fertilizer in a field of corn. (Photographer: Asim Hafeez/Bloomberg)  
A person spreads fertilizer in a field of corn. (Photographer: Asim Hafeez/Bloomberg)  

Shares of UPL Ltd. rose the most in five months as analysts maintained their bullish investment recommendation on the agrochemical maker after its third-quarter results met estimates.

The company’s net profit stood at Rs 701 crore in the three months ended December, according to its exchange filing. That compares with the Rs 693.5-crore consensus estimate of analysts tracked by Bloomberg. The numbers are not comparable as the firm acquired U.S.-based Arysta Lifescience Inc. last year.

Its revenue stood at Rs 8,892 crore during the period. The top line was mainly aided by UPL’s business in Latin America—its biggest market. The fertiliser maker, in its investor presentation, said the Latin American business—that contributed 47 percent to UPL’s total revenue in third quarter—grew 21 percent year-on-year to Rs 4,203 crore (adjusted for Arysta acquisition). The domestic business rose 41.5 percent year-on-year to Rs 750 crore.

Also, brokerages, including Jefferies and Motilal Oswal, said the benefits from Arysta’s acquisition aided the company’s operational performance. They raised their earnings per share estimate for the ongoing financial year.

Shares of UPL rose as much as 5.6 percent intraday to Rs 573.70 apiece. That compares with a 0.73 percent drop in the benchmark Nifty 50 Index.

Opinion
UPL Q3 Results: Profit Meets Estimates As Latin American Markets Shine

Here’s what brokerages have to say about UPL’s third-quarter results…

Jefferies

  • Maintains ‘Buy’ with a target price of Rs 795 apiece.
  • Robust margin expansion; Arysta synergies on track.
  • Key positives: the company’s diversified business model and better growth visibility over the medium term
  • Raises FY20 EPS estimates by about 3 percent.

CLSA

  • Maintains ‘Buy’ and raised target price to Rs 770 apiece from Rs 720 earlier.
  • Revenue and Ebitda growth in line with estimates.
  • Arysta synergies going strong; FY20 sales and Ebitda guidance maintained at 8-10 percent and 16-20 percent, respectively.
  • Gaining share in key markets despite difficult external environment.
  • EPS estimate for FY20 raised 2-9 percent; available at attractive valuations.

Morgan Stanley

  • Maintains ‘Overweight’ but cuts target price to Rs 654 apiece from Rs 759.
  • Strong show despite tough macro conditions.
  • High-margin geographies disappoint; fourth-quarter debt reduction guidance appears tough.
  • Sees 13 percent Ebitda growth in FY21-22; trades at a nearly 30 percent discount to global peers.

Motilal Oswal

  • Maintains ‘Neutral’ with a target price of Rs 613 apiece.
  • Latin America continues to lead growth; Europe/North America are a drag.
  • Operational performance aided by synergy benefits from Arysta’s acquisition.
  • Increase in gross debt (sequentially and on nine-month basis) a cause for concern.

Prabhudas Lilladher

  • Maintains ‘Buy’ with a target price of Rs 740 apiece.
  • In line results; guidance maintained.
  • Gaining market share across geographies.
  • Key beneficiary if coronavirus-related disruptions get elongated.