UPL Ltd has launched a new business unit called Natural Plant Protection (NPP), which will focus on bio-solutions.
The company’s move is aimed at exploiting growth opportunities in the biosolutions market, which is expected to experience double-digit growth to $ 10 billion by 2025, compared to traditional agrochemicals, which are expected to grow at a figure.
Given the better growth outlook, investors and analysts are positive about the move.
“This step is in line with its strategy to increase the share of high growth, differentiated margin and sustainable solutions products in overall revenue to 50% by 2026,” Sharekhan analysts said in a statement. note to customers.
UPL aims to double bio-solutions revenue to $ 700 million by fiscal year 24-25, they said.
While the new division may improve the long-term outlook, the outlook for the company also looks decent in the short to medium term. UPL ended fiscal 21 on a high note, not only in terms of growth rate, but also in terms of debt relief and synergies arising from the acquisition of Arysta.
UPL’s 15% year-over-year EBITDA growth in FY21 was 10-12% higher than expected. The turnover growth was 8%. For FY22, he expects revenue growth of 7-10%, with EBITDA growth of 12-15% and net debt on EBITDA less than 2 times. The ratio was 2.2 times at the end of FY21 and up to 3 times at the end of FY20.
UPL had managed cost synergies of $ 235 million in two years with the acquisition of Arysta, against a forecast of $ 200 million. Revenue synergies of $ 440 million also exceeded expectations by $ 350 million.
In terms of outlook, domestic performance should remain solid, driven by a normal monsoon.
However, India contributes just over a fifth of overall revenue, while the company derives the majority of its sales from the global market. Latin America remains the largest contributor and driver of growth, contributing almost two-fifths of overall sales in the fourth quarter.
For the June quarter, Sharekhan analysts expect strong double-digit average growth for India, Latin America and the rest of the world (RoW). The US and Europe, however, could see stable to moderate growth, with price hikes expected in all regions. Easing supply constraints with controlling covid can also help boost U.S. revenues. Overall, rising agricultural commodity prices and increasing farmer incomes are expected to drive the growth of agro-related activities globally.
ICICI Securities analysts said in a June 28 memo: “We model UPL to report both income and a net income CAGR of 8.6%, for fiscal years 21-23.” of these positive points.
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