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Q2FY23 Preview: UPL: Revenue seen at Rs122,730 million, PAT at Rs7,427 million

31 Oct 2022 , 06:26 AM

Result date: 1^st November, 2022
Recommendation: Buy
Target price: Rs1,040

Analysts at IIFL Capital Services expect a fairly-healthy quarter for UPL, with ~16% revenue growth over the year-ago quarter, primarily driven by double-digit growth across LatAm, Rest of the World regions and North America. Europe is likely to deliver muted growth due to product bans and f/x headwinds. India business will catch up in Q2, in line with progress in Kharif season.

LatAm region should deliver continued volume growth along with favorable forex movement. Revenues from Rest of the World regions also likely to deliver strong growth, led by strong trends in China.

UPL is likely to deliver low-to-mid teens growth for the overall Kharif season (typically H1). This implies a high double-digit growth in Q2 for India business, though growth is restricted by decline in paddy acreages. Growth in North America should be supported by continued price hikes across the product portfolio. Demand for glufosinate is robust in North America and UPL will be a key beneficiary across this
portfolio. Europe business is impacted by implementation of product bans. Besides, INR appreciation versus the Euro will further drag performance in Q2.

Despite rising input costs, analysts at IIFL Capital Services expect gross margins to be stable over the year-ago quarter on the back of price hikes and mix shift towards high-margin geographies, such as North America.

Q1FY23 Profit After Tax (PAT) benefited by a forex gain worth Rs880 million due to mark-to-market revaluation of debt. Analysts at IIFL Capital Services have built-in higher finance cost in Q2FY23, owing to rise in working capital requirements.

Important management insights to watch out for:

Outlook across key segments, markets
Margin drivers

Rs. Million	September 2022 estimates	YoY change
Revenue	122,730	16.1%
EBITDA	24,440	19.5%
EBITDA margin	19.9%	56 bps
Profit After Tax	7,427	10.2%
EPS (Rs.)	9.9	12.3%