Sector Outlook: Netural
Volume led growth across regions
UPL Ltd. has reported strong operational performance during the quarter, driven by revenue growth and a significant turnaround in profitability. The company also achieved EBITDA growth and a margin expansion, aided by operational efficiency, disciplined cost control, and improved product mix across geographies. Strategic actions, including tighter working capital management, improved inventory control, and key capital transactions such as a rights issue and a stake sale in Advanta, enabled a net debt reduction of ~$1bn, strengthening the balance sheet and positioning the company for sustainable long-term growth. While UPL has shown a strong recovery in FY25, the outlook for the H1FY26 remains cautious, with Q1 and Q2 expected to be subdued due to geopolitical uncertainties and a recovering demand environment. However, the management has guided for 4–8% revenue growth and 10–14% EBITDA growth in FY26, aided by continued operational efficiencies and easing input costs. Growth is expected to be led by North America, Latin America, and potentially ROW, where the company anticipates outperforming the broader agrochemical industry. With improving margins, a leaner balance sheet, and recovery across key geographies, UPL can deliver above-industry performance in the medium term. Overall, the company appears undervalued relative to its improving fundamentals, and continued deleveraging and volume growth provide long-term growth visibility.
Key Concall Highlights
Latin America Business Outlook:
UPL’s Latin American business is expected to sustain strong volume-led growth, particularly in Brazil and other LATAM markets. However, this will be partially offset by pricing and forex pressure. Pre-emergent herbicides have been impacted in Argentina and Mexico, adding to the regional challenges. The company remains focused on strengthening its farmer engagement model through partnerships to drive direct sales to large growers and increase market share growth.
North America Business Outlook:
The North American market continues to benefit from strong in-season demand and rebate normalization. UPL has significant volume growth across portfolios, led by herbicides (Interline and Moccasin). The company focuses on expanding its differentiated and sustainable product portfolio while optimizing working capital and inventory levels.
Europe Business Outlook:
UPL performance in Europe is expected to be driven by fungicide and NPP (Natural Plant Protection) growth, with products like Proxanil and biostimulants showing strong demand. They are focusing on the NPP business with an expected CAGR of ~13% between FY25 and FY30, with a commitment to deliver $700 mn of revenue in this segment by FY27.
UPL Sustainable Agri Solutions:
UPL’s Sustainable Agri Solutions (SAS) segment in India is expected to continue its recovery in Q4FY25, driven by herbicides’ new launches and a strong NPP portfolio. Contribution margins have already improved in Q4 due to portfolio rationalization, new launches, and stable input costs. The company remains focused on normalizing inventory and strengthening its farmer-centric approach. Management expects volume and price growth for India in the coming year, with Rs. ~2bn revenue anticipated in FY26.
Advanta Enterprises:
Advanta Enterprises, UPL’s seed platform, witnessed growth in Q4FY25, and the outlook remains positive due to strong traction across key products, with good growth across major regions. Despite lower margins in H1FY25 due to higher input costs, the company witnessed margin recovery in H2, led by a better product mix. The company has recently concluded a ~12.5% stake sale to Alpha Wave for a total consideration of $350 mn. The transaction helps reduce net debt, aligns with UPL’s financial objectives, and improves overall financial stability.
Guidance:
(1) Given the strong performance trajectory in Q4FY25, the management reiterated their EBITDA guidance of an improvement of ~10-14% in FY26. (2) The company anticipates generating USD 300-400 million in cash flow from operations in FY26. (3) The company will launch 20+ new products across all regions in FY26, with the bulk of new product launch revenue expected from North America, Latin America, and Europe, which would contribute to revenue.
Valuation and Outlook
UPL Ltd. has reported strong operational performance during the quarter, driven by revenue growth and a significant turnaround in profitability. The company also achieved EBITDA growth and a margin expansion, aided by operational efficiency, disciplined cost control, and improved product mix across geographies. Strategic actions, including tighter working capital management, improved inventory control, and key capital transactions such as a rights issue and a stake sale in Advanta, enabled a net debt reduction of ~$1bn, strengthening the balance sheet and positioning the company for sustainable long-term growth. While UPL has shown a strong recovery in FY25, the outlook for the H1FY26 remains cautious, with Q1 and Q2 expected to be subdued due to geopolitical uncertainties and a recovering demand environment. However, the management has guided for 4–8% revenue growth and 10–14% EBITDA growth in FY26, aided by continued operational efficiencies and easing input costs. Growth is expected to be led by North America, Latin America, and potentially ROW, where the company anticipates outperforming the broader agrochemical industry. With improving margins, a leaner balance sheet, and recovery across key geographies, UPL can deliver above-industry performance in the medium term. Overall, the company appears undervalued relative to its improving fundamentals, and continued deleveraging and volume growth provide long-term growth visibility.
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