UPL Q3 Results Preview: May See Weak Quarter On Lack Of Demand

UPL Ltd. is estimated to see a weak third quarter in fiscal 2024, as the crop protection industry is witnessing a lack of demand globally, according to analysts.

• Revenue expected to fall 19.1% to Rs 11,060 crore.

• Ebitda to decline 43% to Rs 1,635 crore.

• Margin to contract to 14.8% vs 21%.

• Net profit to fall 99% to Rs 5 crore.

Kotak Institutional Equities expects UPL to report yet another weak quarter due to continued destocking of channel inventories across world markets and pricing pressure emanating from China.

It sees consolidated revenue falling 30% year-on-year, driven by revenue decline across North America, Brazil, Europe and India. Latin America ex-Brazil and rest of world may perform relatively better, with flattish-to-slightly lower revenue year-on-year, the brokerage said.

KR Choksey expects revenue to decline 30% YoY (-5.8% QoQ) to Rs 9,575 crore due to a lack of demand globally. Exports will be hit badly, primarily by a decline in sales in North America, Brazil, and Europe, it said.

Kotak Institutional Equities forecasts Ebitda margin to remain under severe pressure, driven by both gross margin decline (amid increased rebates) as well as operating leverage.

Selling general and administration expenses should be lower YoY, due to lower advertisement and promotional spends, versus the high base of Q3 FY23, when UPL was a sponsor for the FIFA World Cup (December 2022).

Finance costs are expected to stay elevated amid higher interest rates. The company is likely to report a large net loss for the quarter, according to Kotak.

KR Choksey expects the adjusted Ebitda to be Rs 1,005 crore. The adjusted Ebitda margin is expected to contract 1,174 basis points YoY (contract 536 bps QoQ) to 10.5%, due to channel destocking and decline in price realisation.

It projects adjusted net loss at Rs 468 crore.

Last quarter, the management had highlighted the company's plans to reduce gross debt by $500 million, which will include a mix of long-term and short-term debt repayment.

"Going forward, as we look ahead to the second half of the year, we are confident of delivering progressively much improved profitability in H2," Anand Vora, chief financial officer of the company, had said in the Q2 concall.

The company revised its FY24 guidance to flattish revenue growth due to "adverse transitory impact of the inventory repricing adjustments in H1 and the expected impact in H2". Ebitda is expected to be in the range of flat to -5% versus that of the previous year, Vora had said.