Expectations of a strong operational performance in the second half of 2020-21 are also adding to the optimism. “UPL expects strong demand in H2 driven by record crop prices across regions and market share gains in key regions such as Latin America, North America, Asia among others,” said brokerage firm Phillip Capital in a recent note.
Continued traction in the seeds business as well as pick up in Bio-solutions segment post Arysta integration are seen aiding growth, the note added.
Stock valuations, too, remain favourable at current price. At 6 times its FY22 estimated enterprise value to EBITDA, the 5th largest global agrochemicals
maker trades at a steep discount of 40 per cent to its 5-year historical average.
However, the valuation discount is mainly on account of recent events regarding governance issues. Although, the management has clarified its position on each instance, the frequency and nature of issues have kept investors cautious.
“We believe that the multiple corporate governance issues faced by the company recently are fully discounted in the price and at current valuations the stock presents a good opportunity to accumulate on the back of expectations of robust second half, debt reduction and strong traction across key geographies,” said Avinash Gorakshakar, Head of Research, Profitmart Securities.
Those at Edelweiss Securities say, given UPL's strong business fundamentals and solid global franchise, we maintain 'buy' with target price of Rs 615.