UPL Ltd. Stock Analysis: A Comprehensive Look at its Investment Potential for the Next Two Years

As of June 24, 2018, UPL Limited (UPL LTD) is trading at an INR 640.2, a significant low point compared to its 52-week high. While currently trading lower, this article explores the financial health, projected growth, and underlying factors that could influence UPL's share price in the coming two years. Analyzing its past performance and employing a discounted cash flow (DCF) model, we aim to provide actionable insights for potential investors.

Historical Performance of UPL Ltd.

UPL Limited has a rich history of consistent growth and expansion over the past few years, with various financial metrics analyzed for each of the given financial years ending on March 31. These include:

Financial Year Ending on 31 Mar 2015

Sales Growth: 12.25% Profit Increase: 20.45% Margin Improvement: 0.64% Borrowings Reduction: –2.06% Share Price Increase: 104.38%

Financial Year Ending on 31 Mar 2016

Sales Growth: 16.19% Profit Reduction: –17.83% Margin Decline: –2.77% Borrowings Increase: 60.28% Share Price Increase: 9.51%

Financial Year Ending on 31 Mar 2017

Sales Growth: 16.12% Profit Increase: 83.72% Margin Improvement: 3.90% Borrowings Increase: 20.98% Share Price Increase: 54.43%

Forecast for Financial Year Ending Mar-18 and Mar-19

Financial Year Ending Mar-18 (Estimated): Sales Growth: 6.54% Profit Increase: 22.63% Margin Improvement: 1.60% Borrowings Reduction: –34.95% Estimated Share Price: INR 730.7 Financial Year Ending Mar-19 (Estimated): Sales Growth: 5.72% Profit Increase: 24.23% Margin Improvement: 2.13% Borrowings Reduction: –64.13% Share Price Increase: 24.24% Estimated Share Price: INR 907.8

Financial Ratios and Insight

Financial ratios play an important role in assessing the financial health and growth potential of a company. For the financial year ending on Mar 31, 2017, UPL LTD reported the following ratios:

Net Income/Sales: 0.11 Net Income/Pre Tax Income: 0.90 Pre Tax Income/EBIT: 0.72 EBIT/Sales: 0.16 Sales/Assets: 0.80 Assets/Equity: 2.79 Return on Equity: 24% Return on Assets: 8% Retention Based Growth Rate: 24% Market Capitalisation: INR 38712 crores Add: Debt: INR 6361 crores Less: Non Current Investments: INR 378 crores Enterprise Value: INR 44695 crores Net Profit: INR 1727 crores Add: Interest: INR 735 crores Less: Tax Savings on Interest: INR 75 crores Less: Other Income: INR 452 crores Firm Profits: INR 1935 crores Sales: INR 16312 crores Add: Other Income: INR 452 crores Total Income: INR 16764 crores Firm Margin: 12% Enterprise Value to Total Income: 2.67 Enterprise Value to Total Income to Firm Margin: 23.09 Price to Earning: 22.42 Price to Book Value: 5.29 Debt to Equity: 0.87 Free Cash Flow to Firm: INR -2707 crores Free Cash Flow to Equity: INR -3442 crores Price to Earning Growth: 0.27

Investment Recommendations

Based on these ratios, UPL LTD presents a potentially attractive investment opportunity. The estimated share price of INR 730.7 for Mar 2018 suggests a 10% return over the next 6 to 12 months, assuming the current market conditions and trends hold. As the company continues to report significant profit increases and margin improvements, coupled with reduced borrowings, its financial health appears robust.

If your expected return is 10% in the next 6 to 12 months, we recommend buying and holding UPL Ltd. The clear link between profitability growth and increasing market cap indicates a strong financial footing for future growth.

Conclusion

Despite the current low point of UPL LTD, the company's past performance and forecast look promising. With estimated returns of 10% and a solid financial picture, UPL Ltd. is worth considering for potential investors looking to capitalize on the stock’s growth potential over the next two years.