Is UPL investment worthy at 530?
Updated
Disclaimer: This discussion is meant to be educational in nature and not a recommendation as I'm not a certified analyst.
Fundas: Midcap (₹40Kcr), 2nd largest Indian co. in pesticides and agrochems (PI Ind is no.1 at ₹60Kcr), Fitch outlook negative, UPL board itself announced recovery in fy25
Next trigger is upcoming qrtrly results. Expect weak results. Global outlook not great. Budget was non-event. No HNI holds it, but several MFs do hold. Local market is looking for a bottom.
Price Movements: From Jun21 to Aug23 (26 months), UPL stayed in a box from life-hi 864.70 to apprx 622. Then qtrly results ending Sep23 came and the management comments were not encouraging. The waterfall drop took it to 527 -> 615 -> 452 (see black arrows). The downward channel support at 452 as marked was respected and on 6Jun24 (6 wks ago) UPL broke out of 527 which also happened to be the channel top. What a coincidence, huh? From the low of 452 the stock rose to 580 (128 points or 28% rise). That makes 452 a "sure buy level."
Technicals: CMP is 530 as I write this on 25July 1pm. The oscillators point to further possible downside from here. Price is hovering around 527 which is a good support level, but the odds are that it may not hold after the results.
If a strong negative cue materialises (earnings, global, ???) then UPL may break 527 support. In that case it is likely to dip to 518 (20SMA) -> 500 -> 489 level (which is near the channel top). Below 489 it could retest 452 level but unlikey.
LT Targets (min 2yrs till Sep26):
530 -> 580 -> 610-622 -> 660 -> 700
Smash the booster rocket if you like this effort.
Use comments to let me know what you think.
Fundas: Midcap (₹40Kcr), 2nd largest Indian co. in pesticides and agrochems (PI Ind is no.1 at ₹60Kcr), Fitch outlook negative, UPL board itself announced recovery in fy25
Next trigger is upcoming qrtrly results. Expect weak results. Global outlook not great. Budget was non-event. No HNI holds it, but several MFs do hold. Local market is looking for a bottom.
Price Movements: From Jun21 to Aug23 (26 months), UPL stayed in a box from life-hi 864.70 to apprx 622. Then qtrly results ending Sep23 came and the management comments were not encouraging. The waterfall drop took it to 527 -> 615 -> 452 (see black arrows). The downward channel support at 452 as marked was respected and on 6Jun24 (6 wks ago) UPL broke out of 527 which also happened to be the channel top. What a coincidence, huh? From the low of 452 the stock rose to 580 (128 points or 28% rise). That makes 452 a "sure buy level."
Technicals: CMP is 530 as I write this on 25July 1pm. The oscillators point to further possible downside from here. Price is hovering around 527 which is a good support level, but the odds are that it may not hold after the results.
If a strong negative cue materialises (earnings, global, ???) then UPL may break 527 support. In that case it is likely to dip to 518 (20SMA) -> 500 -> 489 level (which is near the channel top). Below 489 it could retest 452 level but unlikey.
LT Targets (min 2yrs till Sep26):
530 -> 580 -> 610-622 -> 660 -> 700
Smash the booster rocket if you like this effort.
Use comments to let me know what you think.
Trade active
Another weekly chart with SMAs and RSI
Trade active
UPL went up by 5+% in a week - same as its 6-month rise! Hit a high of 577. It tells us that (1) 530 is the new solid support level. (2) Regardless of results, the GOM (God of the Market!) has decided to support UPL in the range of 530-560. Why?
UPL is about to announce (by Sep end) a Rights issue to raise ₹4,200crs, the Rights price to be announced 'later.' It takes 3 to 5 months to show up in your account. This takes the date of issuance to start of 2025 to end of fy2024-25. Since the issue price is at a discount to induce existing investors to buy the Rights (assuming 1:1), I expect this price to be in the range of 450 to 500. CMP is about 560.
If the Rights issue is fully subscribed, it would add about 9-12% more shares to the current total of 75crs. So GOM will prop up the share in the range of 530-550 to negate the impact of higher total shares. That's my 'back of the envelope' logic. Long Term targets stand as given. Given the market frenzy, UPL could trend in the range of 530-600 in the coming weeks.
Note
22 Aug, 2024 10:10am
I must admit that GOM just got greedy today. UPL hits 585 just now. This is a bit ridiculous for this stock. It means they don't want to offer Rights below 500 but more like 520 which would be considered at a good discount. This is forcing the bottom to be at that price. But I may have spoken too soon. The way a double bottom is formed, technical target would be between 610-622 (given as a possible above). That would make Rights price even higher!! Let's hope this frenzied buying stops and the stock comes down to 550-560 levels so we can get our Rights at a reasonable price. :)
Note
05 Sep, 2024 09:55am
If wishes were horses... tech target range 610-622 is met. CMP 612. No hint of Rights yet from the UPL management. One thing for sure is that if and when they announce it, this stock will go to our next targets of 660, then 700, or even 777 (JAMES BOND level :). /\
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