Shares of UPL Limited surged by over 5% on February 3, 2025, climbing as high as INR 636.80, following strong recommendations from global brokerage firm Investec. The brokerage upgraded its rating on UPL from 'sell' to 'buy' and significantly increased its price target from INR 450 to INR 700, driven by positive forecasts on debt reduction and operational efficiencies.
Investec's analysis highlighted UPL’s transition to favorability, noting the company's ability to improve its financial stability through various initiatives, including rights issues, stake sales, and solid operating cash flow. This new outlook aligns with anticipated increases in Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA), which are expected to rise by 1-3% for FY25-27.
"We see strong bounce back versus last year, with normalization of business and recovery of volumes and prices, which helped us regain our contribution margins back to previous high levels," stated Jai Shroff, UPL's Chairman and Group CEO. The surge reflects broader investor confidence, particularly in light of recent agricultural budget measures aimed at supporting farmers.
Investors have also reacted positively to the Union Budget 2025, which introduced initiatives to support the agriculture sector, including improved credit access and the Dhan Dhanya Yojana for enhanced productivity. These measures collectively aim at invigorate the agricultural demand environment, likely benefiting companies like UPL.
According to Nuvama, another brokerage firm, the upgrade reflects increased EPS expectations for FY26 and FY27, alongside cuts to FY25 estimates, anticipating gradual recovery within the sector.
While UPL saw revenue growth of 10% year-over-year, driven by volume increases primarily across Latin America and Europe, profitability has returned significantly, with the recent quarter reporting net profits of INR 828 crore compared to losses of INR 1,217 crore during the same period last year.
This positive momentum indicates UPL's solid recovery, confirmed by statements of operational leadership and prudent management strategies. The stock has shown remarkable performance over the past month, gaining over 18%, supported by both external economic factors and internal operational adjustments.
Looking forward, there is optimism surrounding UPL's projected EBITDA margin for 3QFY25, expected to stabilize at 19.6%, underscoring the company's efforts to maintain cost efficiencies amid fluctuated market conditions.
Investor sentiment seems buoyed not just by the favorable reports but also by the broader economic and agricultural initiatives outlined during the Budget announcements, reflecting deeply rooted changes expected to generate sustained demand.
Overall, the strategic financial maneuvers, backed by the favorable macroeconomic policies, signal to investors and analysts alike the positive turning point for UPL Limited's stock. The future appears promising, with strong indications of recovery and growth potential underpinned by solid market fundamentals and company commitments.