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Q4FY23 Preview UPL: Revenue seen at Rs. 167,040 million, PAT at Rs. 15,374 million

5 May 2023 , 03:20 PM

Result date: 8^th May, 2023

Recommendation: Add

Target price: Rs. 855

Analysts at IIFL Capital Services believe UPL’s performance in Q4 will be soft, owing to price correction in certain generics at a global level due to build-up of inventories across key geographies (eg. North America), along with higher exports arising from China. They expect a ~5% revenue growth over the year-ago quarter, driven by high-single digit volume growth and FX-led pricing tailwinds. However, this would be partially offset by decline in pricing across geographies.

North America is likely see a decline of ~10%. Glufosinate is an important product for UPL in this region. Recently, China has added several new capacities of Glufosinate, which has triggered price corrections in the global markets. Besides, prices have corrected in the range of 3-30% across several generic molecules.

Europe business is likely to deliver flattish to low-single digit growth, partially owing to FX-led tailwinds. As share of revenues from North America and Europe would be relatively lower in Q4, contribution margins are likely to dip on YoY basis.

LatAm is the outperforming region for UPL and revenue growth is likely to be in high-double digits. Q4 features release of working capital in LatAm, which would also aid deleveraging. With higher probability of El Nino during 2023, management believes consumption of insecticides is poised to rise in LatAm.

India business is expected to witness low-double-digit revenue growth. Revenues from Rest of the World regions would be modest, owing to weak liquidation of inventory.

Analysts at IIFL Capital Services expect UPL’s EBITDA margins to be flat. Reduction in commodity prices should aid some benefit in working capital. Release in working capital during Q4 is in line with management’s expectation.

The company’s Profit After Tax or PAT could remain flattish, down 0.6%.

	March 2023 estimates	YoY change
Revenue (Rs. mn)	167,040	5.3%
EBITDA (Rs. mn)	37,578	4.6%
EBITDA margin	22.5%	(15) bps
Profit After Tax (Rs. mn)	15,374	(0.6)%
EPS (Rs.)	20.5	1.2%