31 Jan 2024 , 02:54 PM
Result date: February 2, 2024
Recommendation: Add
Target price: ₹585
Analysts at IIFL Capital Services expect another quarter of weak performance for UPL with revenue declining 1.3% sequentially and 27% over the year-ago quarter, as the company continues to grapple with steep price corrections in generic portfolio and de-stocking. Volume offtake is expected to improve in markets like LatAm (including Brazil), Asia (ex. India) and RoW; while North America remains a concern due to the weak Glufosinate sales. Domestic market to witness volume decline, owing to weak Rabi season and lower reservoir levels mainly in South India.
UPL’s gross margins could contract by 710 basis points over the year-ago quarter, while EBITDA margins could further contract by 1,170 basis points; owing to higher overheads. Finance cost (excluding FX impact) to remain elevated, on rising global interest rates. Also, the recent devaluation of Argentina Peso by 50% will adversely impact FX. Gross debt to remain elevated on higher working capital (likely to ease in Q4). Management had guided to reduce gross debt by US$500 Million by the end of FY24. The Board has recently approved fundraising of ₹42 Billion via the rights issue. Proceeds will be utilized to pare debt and avoid any rating downgrade by credit agencies.
UPL could post Loss After Tax during the quarter.
Important management insights to watch out for:
₹ Million |
December 2023 estimates |
YoY change |
QoQ change |
Revenue |
100,427 |
(26.6)% |
(1.3)% |
EBITDA |
10,512 |
(65.4)% |
(33.3)% |
EBITDA margin |
10.5% |
(1,171) bps |
(502) bps |
Profit After Tax |
(5,325) |
(148)% |
NM |
Source: IIFL Research
NM stands for not matchable
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