Earnings Outlook
Excess rains to dampen UPL's Jul-Sept earnings
This story was originally published at 22:27 IST on 8 November 2024
Register to read our real-time news.Informist, Friday, Nov. 8, 2024
By Ayushman Mishra
MUMBAI – Agrochemicals maker UPL Ltd. is expected to remain loss-making in Jul-Sept due to excess rainfall in the country. The company is expected to report mid-single digit revenue growth in the September quarter. The company is expected to report a consolidated net loss of INR 234.63 million for the latest quarter, according to the average of estimates by eight brokerages. UPL is expected to report a consolidated revenue of INR 105.68 billion for the quarter, according to these eight estimates.
Excessive rains have dampened demand for agrochemicals and fertilisers, brokerage Elara Securities said. Continuous rainfall has led to lower application of pesticide sprays, resulting in lower-than-expected growth in volumes for these companies, the brokerage said. While the brokerage is positive on fertiliser and domestic agrochemical companies on expectations of improvement in demand, the recurrence of excessive rains during Oct-Mar will be a key risk to its estimates, Elara Securities added.
Of the eight estimates, Kotak Institutional Equities has the highest estimate for net profit at INR 865 million, while KR Choksey Research expects the company to post a net loss of INR 2.58 billion. The highest estimate of the net sales for the September quarter was given by Elara Securities for INR 109.84 billion, while the lowest was given by Sharekhan Ltd. for INR 101.55 billion.
UPL in 2022-23 (Apr-Mar) transferred its seeds business to Advanta Enterprises to facilitate unlocking value for its shareholders. The company is expected to have ongoing margin pressures and a leveraged balance sheet. However, the company's plan to raise money through a rights issue and unlocking value from Advanta can repair its balance sheet, analysts said. While the company is expected to report a double-digit volume growth in the September quarter, it will be partially offset by a fall in prices.
The company is expected to report mid-single digit revenue growth driven by a rise in volumes across most regions, although pricing may be a drag, Kotak Institutional Equities said.
UPL is expected to post earnings before interest, tax, depreciation and amortisation of INR 16.59 billion for the quarter, as per the average of estimates from six brokerages. UPL's EBITDA margin is projected to increase by 20 basis points year-on-year, as the liquidation of high-cost inventory has led to a reduction in the negative impact of higher rebates and discounts in the previous quarters. The company’s EBITDA margin is expected to expand 79 bps on year due to expansion in gross margins as most of the high-cost inventory has been liquidated in the previous quarters, KR Choksey said.
Investors should watch out for trends in prices of raw materials, debt levels, and capital expenditure plans of the company, and global demand-supply scenario as they remain the key monitorables, Motilal Oswal said. The company will announce its financial results for Jul-Sept Monday. On Friday, shares of UPL ended at INR 557.60 on the National Stock Exchange, down 1.7%.
Following are the Jul-Sept earnings estimates of UPL Ltd. based on reports from eight brokerages:
|
Brokerage Firm |
Net Sales |
Net Profit |
EBITDA |
|
|
-------------(in INR million)--------------
|
||
|
Anand Rathi Share and Stock Brokers Ltd. |
105,499.00 |
247.00 |
-- |
|
Antique Stock Broking Ltd. |
104,238.00 |
-437.00 |
16,308.00 |
|
Elara Securities (India) Pvt. Ltd. |
109,836.00 |
-1,051.00 |
16,475.00 |
|
Kotak Institutional Equities |
105,909.00 |
865.00 |
16,393.00 |
|
KR Choksey Research |
106,121.00 |
-2,579.00 |
17,668.00 |
|
Motilal Oswal Financial Services Ltd. |
106,519.00 |
635.00 |
16,819.00 |
|
Nuvama Wealth Management Ltd. |
105,768.00 |
-67.00 |
15,865.00 |
|
Sharekhan Ltd. |
101,550.00 |
510.00 |
-- |
|
Average |
105,680.00 |
-234.63 |
16,588.00 |
End
Edited by Akul Nishant Akhoury
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