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Margin expansion led by better product mix and operating leverage

Operating performance beats our estimates

* UPL Ltd (UPLL) made a decent start to FY26, with EBITDA growing 14% YoY to INR13b, led by a better product mix (EBITDA margin up 150bp YoY), higher capacity utilization, and lower COGS (gross margins up 460bp YoY), despite revenue growth of 2% to INR92b.

* Pricing pressure persists globally. However, UPLL remains on track to accelerate growth from 2HFY26 onwards, driven by strong prospects in the Super Specialty Chemicals (SSC) segment (within Superform), new product launches, and increased investments by Advanta (for new market entries).

* We maintain our FY26/FY27 earnings estimates and reiterate Neutral with a TP of INR700.

Growth across platforms except UPL Corp due to lower volumes

* UPLL reported revenue of INR92b (in-line) in 1QFY26, up 1.6% YoY (volume decline: 1%, price up: 1%, forex up: 2%). EBITDA stood at INR13b (est. INR11.7b), up 14% YoY. EBITDA margin was at 14.1% vs. 12.6% in 1QFY25, due to a 460bp expansion in gross margin. PAT came in at INR1b (est. net loss INR2b) vs a net loss of INR2b in 1QFY25.

* India’s revenue rose 21% YoY to INR22.6b, led by growth in the seeds (up 40%) and crop protection businesses (up 13%). North America’srevenue grew 8% YoY to INR13.4b, led by pricing improvement in selective active ingredients. LATAM’s revenue declined 10% to INR24b due to a decrease in volumes in Brazil (insecticides) and Mexico. This decline was offset by higher revenue in the seeds business. Europe grew 8% YoY to INR15.4b, aided by volume growth in herbicides and NPP, partially offset by a decline in Turkey. RoW’srevenue declined 10% YoY to INR16.8b, owing to lower revenue in seeds and crop production in Africa, Australia, and South East Asia.

* Advanta’s revenue increased 20% YoY to INR11.8b, driven by higher volumes and improved realizations in corn, sorghum, and sunflower. UPL SAS’s revenue grew 13% YoY in 1QFY26, driven by overall growth in herbicides and new launches (supported by improved pricing and favorable weather). SUPERFORM’s revenue rose 9% YoY to INR25.6b, led by 11% YoY volume growth, supported by a 6% rise in the Active ingredients business and a higher 21% growth in SSC.

* Gross debt declined to INR268b in 1QFY26 vs. INR316b in 1QFY25; net debt declined to INR214b in 1QFY26 vs INR275b in 1QFY25. The decline was primarily led by lower working capital requirements and significant improvement in gearing ratios compared to last year. The company also prepaid perpetual bonds amounting to USD400m (INR34b). Net working capital days improved by 35 days to 86 in 1QFY26 vs 121 in 1QFY25.

Highlights from the management commentary

* UPL Corp: The company witnesses a strong order book growth on a YoY basis (Specifically in Brazil). Management expects the momentum to continue in the coming quarters, with better performance from H2 onwards. However, growth from 2Q to 4Q is expected to come from volumes rather than prices.

* Inorganic expansion: Advanta remains open to inorganic expansion as part of its strategy. The company aims to invest in ‘New Seeds’. However, a significant litigation between the two companies is currently underway, with a trial scheduled for next year in the Court of Australia.

* New launches: In India, new products in the herbicide category (Centurion EZ and Canora EZ) helped improve the product mix. The company expects USD130m in revenue from new launches this year (primarily in H2FY26). Further, Advanta is making significant investments in new market entries and product launches.

Valuation and view

* UPLL has demonstrated resilience in 1QFY26 despite macro headwinds. Building on this momentum, the company is expected to accelerate growth from 2HFY26 onwards. This growth will be led by healthy volume increases across key regions (North America, LATAM, and ROW), while pricing is expected to remain soft. Moreover, contributions from new products are set to ramp up significantly, with Advanta seeds continuing to grow in both existing and new product lines.

* We expect revenue/EBITDA/Adj. PAT CAGR of 7%/13%/53% over FY25-27. We reiterate Neutral with a TP of INR700 (based on 12x FY27 EPS).

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