Chemical stock to buy now for an upside of 38%; Do you own it?

Synopsis: A mid-cap agrochemical stock received a Buy rating from Anand Rathi with a Rs. 860 target, implying 38 percent upside, backed by restructuring, earnings recovery, margin expansion, and gradual deleveraging.

A Mid-cap company that is engaged in the business of agrochemicals, industrial chemicals, chemical intermediates, speciality chemicals and production and sale of field crops and vegetable seeds, is in the spotlight after receiving Buy rating with target price by Anand Rathi. 

With the market capitalization of Rs. 52,760.29 crore, the shares of UPL Limited is trading at Rs. 625 per equity share, down by 0.88 percent from its previous day’s close price of Rs. 630.55 per equity share. 

Target and Rational

Anand Rathi has maintained a BUY rating on UPL with a target price of Rs. 860, implying an upside of nearly 37.6 percent from the current market price of around Rs. 625. The brokerage believes that despite near-term balance sheet stress, the company’s long-term restructuring strategy and earnings recovery can drive meaningful value creation over the next 12 months. The target is based on 15x FY28 estimated EPS, reflecting confidence in earnings visibility over the medium term.

Three-Phase Restructuring to Unlock Value

UPL has announced a strategic three-step reorganisation aimed at creating a pure-play listed crop protection platform under UPL Global. The restructuring includes the merger of UPL SAS into UPL, followed by a 1:1 demerger of the India crop protection business into UPL Global, and the consolidation of its international crop protection arm into the same entity. This move is intended to simplify the corporate structure, improve transparency, and enable better valuation discovery by separating businesses with distinct growth profiles.

Earnings Recovery and Margin Expansion

Financial projections indicate steady improvement in operational performance. Revenue is expected to grow from Rs. 46,637 crore in FY25 to Rs. 58,352.4 crore by FY28. EBITDA margins are projected to expand from 17.4 percent in FY25 to over 20 percent by FY28, supported by cost optimization and improved product mix. Net profit is estimated to rise significantly from Rs. 897 crore in FY25 to Rs. 4,350.4 crore in FY28, reflecting a sharp turnaround from earlier losses. Return ratios such as RoE and RoCE are also expected to improve consistently over the forecast period.

Deleveraging Remains Key Monitorable

While the restructuring is strategically positive, Anand Rathi notes that it does not immediately reduce absolute debt levels. Net debt is projected to decline gradually, supported by internal accruals and disciplined capital allocation. The company has a stated goal of reducing net debt to EBITDA to 1.2–1.5x in the medium term. Successful execution of this plan will be critical in sustaining investor confidence and achieving the projected valuation upside.

SOTP Valuation Supports Target

Anand Rathi’s target price is backed by a Sum-of-the-Parts (SOTP) valuation approach. The brokerage assigns a 10x EV/EBITDA multiple to UPL Global, 25x to Advanta Seeds, and 15x to Superform, arriving at a fair value of around Rs. 851–Rs. 860 per share on the expanded capital base. The valuation reflects moderate peer multiples while factoring in a holding company discount, suggesting that the current market price does not fully capture long-term growth potential.

Key Risks to Watch

Despite the positive outlook, risks remain. These include delayed demand recovery in key global markets, volatile commodity prices, adverse weather conditions affecting crop cycles, and unfavourable currency movements. Execution risks in the restructuring process could also impact timelines and investor sentiment.

About the Company & Financial Performance

UPL Limited is a Mumbai-based global agrochemical company founded in 1969 that manufactures and sells crop protection products, seeds, and non-agro industrial chemicals across India, Brazil, the US, the UK, and other international markets. Operating through Crop Protection, Seeds, and Non-Agro segments, it offers herbicides, fungicides, insecticides, bio-solutions, seed treatments, and post-harvest solutions under brands such as Feroce, Shenzi, Advanta, and Alta Seeds. 

In Q3FY26, the company reported revenue of Rs. 12,269 crore, reflecting a 12.5 percent YoY growth compared to Rs. 10,907 crore in Q3FY25 and a modest 2.1 percent QoQ increase over Rs. 12,019 crore in Q2FY26. EBITDA stood at Rs. 2,236 crore, registering a strong 33.3 percent YoY rise from Rs. 1,678 crore and a 14.9 percent QoQ growth from Rs. 1,947 crore, indicating improved operating performance and margin expansion.

However, net profit declined to Rs. 490 crore in Q3FY26, down 42.6 percent YoY from Rs. 853 crore in Q3FY25 and 19.9 percent QoQ from Rs. 612 crore in Q2FY26. Despite healthy revenue and EBITDA growth, the sharp drop in profitability suggests higher costs, interest burden, or exceptional items impacting the bottom line during the quarter.

A return on equity (ROE) of about 3.29 percent and a return on capital employed (ROCE) of about 7.66 percent demonstrate the company’s financial position. At the moment, the company’s P/E ratio is 28x lower as compared to its industry P/E 28.7x. 

Anand Rathi’s bullish stance on UPL hinges on long-term value unlocking through structural simplification, earnings recovery, and gradual deleveraging. While near-term gains may depend on operational delivery rather than restructuring mechanics alone, the brokerage sees a clear pathway toward Rs. 860, indicating a potential 35 percent upside for investors willing to take a medium-term view.

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