Q3FY24 Preview: UPL: Revenue seen at ₹100,427 Million, Loss After Tax at ₹5,325 Million

31 Jan 2024 , 02:56 PM

Result date: February 2, 2024

Recommendation: Add

Target price: ₹585

Analysts at IIFL Securities 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:

• Global agrochemical inventory levels
• Impact of falling AI prices on working capital and manufacturing units
• Net Debt and Guidance for Q4FY24

₹ 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