UPL rallies five days in a row on Brazilan JV stake sale; experts see 15% upside
Stock has gained over 10 per cent in the last five sessions and with the momentum picking up in midcaps, the rally may continue in the near term.
By ET Online |
MUMBAI: Shares of UPL have moved higher for five days in a row after the company sold off its entire 50 per cent stake in Brazilian joint venture with SIPCAM.
As per the agreement, UPL will receive gross consideration of $58.5 million, approximately Rs 3.51 billion.
The stock has gained over 10 per cent in the last five sessions and with the momentum picking up in midcaps, the rally may continue in the near term.
According to brokerages, the company’s valuations are attractive and the stock has an upside potential of over 15 per cent.
“Though we expect a double-digit growth in UPL’s revenues in Q4FY2014, but the margin could get affected by a harsh winter in the USA and Europe (along with the adverse impact of the rupee’s appreciation against the dollar). However, we are positive on the company due to its focus on improving cash flows (working capital cycle reduction), buy-back of shares using the free cash on books and new product launches that shall improve the growth outlook,” the Sharekhan report said.
The brokerage has maintained ‘buy’ rating on the stock with a price target of Rs 238 per share.
According Prabhudas Lilladher, UPL will utilize the proceeds of this transaction either to increase its stake in its Brazilian subsidiary DVA Agro or use the funds for newer opportunities. It might also utilize the fund for reduction of debt, which remains a top priority.
“Management highlighted that since this was a non strategic investment, they decided on exiting this JV so as to focus on their subsidiary. Sipcam’s contribution at bottom line level for UPL was minimal,” the report said.
“We maintain BUY with target price of Rs 230. Valuations remains attractive with UPL trading at 7xFY15E earnings,” the report added.
The stock ended at Rs 202.25, up 0.62 per cent, on the BSE. It touched a high of Rs 206.90 and a low of Rs 201.05 in trade today.
As per the agreement, UPL will receive gross consideration of $58.5 million, approximately Rs 3.51 billion.
The stock has gained over 10 per cent in the last five sessions and with the momentum picking up in midcaps, the rally may continue in the near term.
According to brokerages, the company’s valuations are attractive and the stock has an upside potential of over 15 per cent.
“Though we expect a double-digit growth in UPL’s revenues in Q4FY2014, but the margin could get affected by a harsh winter in the USA and Europe (along with the adverse impact of the rupee’s appreciation against the dollar). However, we are positive on the company due to its focus on improving cash flows (working capital cycle reduction), buy-back of shares using the free cash on books and new product launches that shall improve the growth outlook,” the Sharekhan report said.
The brokerage has maintained ‘buy’ rating on the stock with a price target of Rs 238 per share.
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According Prabhudas Lilladher, UPL will utilize the proceeds of this transaction either to increase its stake in its Brazilian subsidiary DVA Agro or use the funds for newer opportunities. It might also utilize the fund for reduction of debt, which remains a top priority.
“Management highlighted that since this was a non strategic investment, they decided on exiting this JV so as to focus on their subsidiary. Sipcam’s contribution at bottom line level for UPL was minimal,” the report said.
“We maintain BUY with target price of Rs 230. Valuations remains attractive with UPL trading at 7xFY15E earnings,” the report added.
The stock ended at Rs 202.25, up 0.62 per cent, on the BSE. It touched a high of Rs 206.90 and a low of Rs 201.05 in trade today.
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