UPL stays on growth path despite geopolitical risks, demand uncertainty

Revenue and operating profit rose for the seventh straight quarter, but investors remain focused on management changes, volume recovery, Advanta listing and restructuring.

The country’s largest agrochemical company, UPL, delivered a stable performance in the first quarter (April-June/Q1) of 2026-27 (FY27). Although the operating environment remained challenging due to geopolitical issues and weather disruptions, the company reported its seventh consecutive quarter of revenue and operating profit growth.

 

While the Q1 performance was broadly in line with expectations, the stock slid about 6.9 per cent in trade due to senior management changes, concerns over volume pressures, and geopolitical uncertainties. At the current price, the stock is trading at just under 13x its estimated earnings for 2027-28. In addition to management changes and the volume trajectory, the Street will track progress on the listing and restructuring of Advanta Seeds, the agrochemical major’s global seeds business subsidiary.

 

The company reported 10.5 per cent year-on-year (Y-o-Y) revenue growth, aided by pricing gains and favourable foreign exchange (forex) movements. Offsetting the 3 per cent pricing gains and the 10 per cent forex tailwind was a 3 per cent decline in volumes. Revenue from its largest market, Latin America (LatAm), grew 8 per cent, led by herbicide and insecticide sales in Brazil, while Colombia and Argentina remained weak.

 

Among other key markets, North America reported 18 per cent sales growth, driven by herbicides, fungicides, post-harvest, and aquatic businesses. India, another key market, registered 15 per cent Y-o-Y growth, with pricing gains offsetting volume softness caused by the monsoon. The European business grew 4 per cent Y-o-Y, aided by favourable currency movements and disciplined pricing actions. The rest of the world business posted 7 per cent growth, backed by a strong performance in Indonesia and South Asia. The seeds business (Advanta) recorded 26 per cent revenue growth, lifted by corn sales in India, Indonesia, and LatAm.

 

Analysts at Systematix Research, led by Harmish Desai, said UPL delivered a resilient start to FY27, with earnings broadly in line with expectations and continued improvement in profitability despite a challenging operating environment. However, near-term growth remains constrained by weather-related volume pressures, uncertain global demand, and geopolitical risks. The brokerage has maintained a ‘hold’ rating with an updated target price of ₹670.

 

Going ahead, the company reiterated its FY27 revenue growth guidance of 7-11 per cent and operating profit growth guidance of 10-14 per cent despite ongoing weather disruptions and geopolitical uncertainties. Growth is expected to be driven by a recovery in crop protection volumes globally, continued momentum in seeds and specialty chemicals, and product launches.

 

Elara Securities believes a diversified product pipeline across crop protection, seeds, and chemical and natural plant protection makes UPL’s portfolio resilient, reflected in its 16 per cent innovation turnover rate, and will remain the key growth driver. Analysts at the brokerage, led by Prashant Biyani, have upgraded the stock to ‘buy’ with a target price of ₹783.

 

On the profitability front, gross margins improved 285 basis points (bps) Y-o-Y to 57.6 per cent, supported by lower-cost inventory and a favourable product mix. However, operating margin expanded by only 60 bps Y-o-Y to 14.7 per cent due to higher operating costs. These were driven by forex-led overhead inflation, higher growth spending at its specialty chemicals arm, Superform Chemistries, and continued investments in digital and strategic initiatives.

 

Analysts led by Sumant Kumar of Motilal Oswal Research said the company delivered a healthy start to FY27, driven by broad-based growth across geographies and business platforms, with operating profit growth outpacing revenue growth on the back of strategic pricing actions, a favourable product mix, and operational efficiencies. While weather-related disruptions affected volumes in certain regions, improving demand trends, market share gains, and a healthier pricing environment supported overall business momentum, they added. The brokerage has a ‘neutral’ rating with a target price of ₹600.

 

While most brokerages remain positive, Anand Rathi Research highlighted key risks, including the resignation of UPL Corporation Chief Executive Officer Mike Frank, uncertainty surrounding the West Asia conflict, adverse weather conditions, unfavourable forex movements, and volatility in raw material prices.