UPL could post a healthy performance in the June 2022 quarter, primarily driven by double-digit growth across North America, LatAm and the Rest of the World regions. Europe is likely to deliver muted growth due to product bans. India will also deliver growth in a single digit, owing to delay in monsoons. Given firm pricing in agri-commodities globally, analysts at IIFL Capital Services expect better realizations to aid growth during the quarter. Consequently, revenue could grow 11.9% over the year-ago quarter.
Analysts at IIFL Capital Services expect some impact on sales owing to the fire accident at UPL’s Ankleshwar unit, the impact of which would last till Q2FY23, given that the unit manufactures domestic-oriented products such as Monocrotophos.
Despite rising input costs, analysts at IIFL Capital Services expect gross margins to be stable year-on-year on the back of price hikes and mix shift towards high-margin geographies such as North America.
Several one-off factors could impact growth in UPL’s Profit After Tax (PAT) for the quarter. In the March 2022 quarter, PAT was affected by a forex loss worth Rs2 billion due to mark-to- market revaluation of debt. Analysts at IIFL Capital Services have built-in higher finance cost for Q1FY23. Their estimates do not factor in any such impact this year. Last year’s Q1 was boosted by a tax credit of Rs1.5 billion. However, analysts at IIFL Capital Services expect normalized tax provision in Q1FY23. This implies reduced PAT on a year-on-year basis.
Key management insights to look into:
| June 2022 estimate | Y-o-Y | |
| Revenue (Rs mn) | 95,260 | 11.9% |
| EBITDA (Rs mn) | 20,669 | 10.9% |
| EBITDA margin | 21.7% | (18) bps |
| Adjusted net profit (Rs mn) | 5,169 | (30.1)% |
| Adjusted EPS (Rs) | 6.8 | (23.4)% |
| Source: IIFL Research |
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