Neutral UPL Ltd For Target Rs.580 by Motilal Oswal Financial Services Ltd
Advanta and Superform cushion crop protection weakness Operating performance above our estimate
* UPL Ltd (UPLL) posted a resilient 2Q operating performance, with EBITDA growing 8% YoY to INR23.8b, driven by a better platform mix. The EBITDA of Advanta/UPL SAS/Superform grew 19%/3%/19% YoY. However, the EBITDA of UPL SAS declined 14% YoY due to weaker volumes amid adverse weather and tight channel liquidity, along with softer pricing and higher input costs.
* The seasonally stronger 2H is likely to benefit from inventory placement shifting closer to application. Further, improving pricing discipline, increasing contribution from higher-margin businesses, healthy volume-led growth in global crop protection, healthy performance from Advanta and Superform, and disciplined cost management are expected to be key growth drivers.
* We largely maintain our FY27/FY28 earnings estimates and reiterate our Neutral rating on the stock with a TP of INR580 (premised on a 12x P/E, i.e., at a 45% discount to the five-year avg. P/E).
Margin expansion offsets weather-led volume softness
* UPLL reported revenue of INR118.6b (est. in-line) in 2QFY27, flat YoY (volume down: -10%, price growth: flat, forex up: +9%). EBITDA stood at INR23.8b (est. INR22.3b), up 8% YoY. EBITDA margin stood at 20.1% (+175bp YoY) . Adj PAT was INR6.7b (est. INR4.7b) in 2QFY27, down 2% YoY (adj. PAT is adjusted for exchange difference and extraordinary expenses).
* Net debt stood at USD3b as of Sep’26 vs. USD2.7b last year (Net debt/EBITDA stood at 2.9x vs. 2.7x last year).
* India’s revenue declined 9% YoY to INR15b, as dry spells hit crop protection and seeds. North America’s revenue grew 19% YoY to INR10.7b, led by volume growth from a new brand. LATAM’s revenue declined 8% to INR52b, as unfavorable rains hurt fungicide volumes in Brazil and herbicides in other LATAM countries. The European business declined 12% YoY to INR12b, as the heatwave led decline continued, particularly in fungicides and Acephate, while the RoW business grew 19% to INR28.4b, led by growth in crop protection in Asia and Africa and seed growth in Australia.
* Advanta’s revenue increased 12% YoY to INR18.8b, driven by growth in sunflower, grain sorghum and field corn across LATAM and Indonesia along with post-harvest growth led by US, LATAM and South Africa. UPL Corp’s revenue declined 8% YoY to INR79.7b, as severe drought conditions continued in Europe amid tight channel liquidity. UPL SAS revenue grew 3% YoY to INR2.1b. SUPERFORM’s revenue grew 28% YoY to INR35.8b, supported by new product commercialization.
* In 1HFY27, UPLL’s revenue/EBITDA/Adj. PAT grew 4%/14%/7% YoY to INR220b/INR40b/INR8.3b.
* Net working capital days increased to 145 in 2QFY27 primarily due to inventory build-up ahead of seasonally larger second half and lower CP volumes (vs. 118 days in 2QFY26). The CFO stood at negative INR96b in 2QFY27 vs. INR48b in 2QFY26.
Key highlights from the management commentary
* Outlook/guidance: Management retained its FY27 revenue/EBITDA growth guidance of 7–11%/10–14%, contingent on no further adverse weather or escalation in West Asia. The seasonally stronger 2H should benefit from inventory placement shifting later into the season, and crop commodity prices, which are up ~25–35% over the past year, should improve farmer profitability and support spending on crop-protection inputs.
* Debt: The rise in net debt reflects higher working-capital requirements and growth investments. The medium-term Net Debt/EBITDA target remains 1.5x, although year-end debt will depend on input prices and better demand. The USD400m maturity in Sep’26 was refinanced to FY29, while the USD500m Dec’26 loan was prepaid and USD400m of replacement financing was raised, extending the maturity to FY32.
* India crop protection — UPL SAS: Volumes declined 8% amid uneven rainfall and weaker demand, while pricing improved 9%. Contribution margin expanded 60bp YoY to 35.6%, supported by differentiated products, with hyper-scale-up brands growing ~80% in 1HFY27. Portfolio mix improvement should sustain profitability, although benefits from early price increases will moderate as higher input costs flow through.
* Global crop protection — UPL Corp: Volumes declined 16% and pricing softened 2%, reflecting weaker Latin American demand, tight channel liquidity and weather-related disruption in Europe. North America benefited from differentiated product launches. Inventory placement should support 2H demand, while higher glufosinate prices should gain broader acceptance as lowcost channel inventory is consumed in the Americas.
Valuation and view
* UPLL delivered a resilient operating performance in 2QFY27, with EBITDA growth supported by a favorable business mix, pricing actions in India and cost efficiencies. Strong performance from Advanta and Superform cushioned weakness in global crop protection, where adverse weather, tight channel liquidity and cautious purchasing weighed on volumes, while softer pricing and elevated input costs pressured margins.
* We believe UPLL is increasingly benefiting from its diversified business model, with growing contributions from Advanta, Superform, and Sustainable Solutions reducing dependence on the cyclical crop protection business. This is supported by a stronger innovation pipeline, continued portfolio premiumization, and ongoing deleveraging efforts.
* We expect the revenue/EBITDA/Adj. PAT to clock ~8%/9%/26% CAGR over FY26- 28E. We reiterate our Neutral rating on the stock with a TP of INR580 (premised on a 12x P/E, i.e., at a 45% discount to its five-year avg. P/E)
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