UPL Q4 Results Review - Higher Rebates, High-Cost Inventory Liquidation Hit Margin: Motilal Oswal

Motilal Oswal Report

UPL Ltd. reported a weak quarter as revenue declined 15% YoY, primarily due to lower agrochemical prices (down 15% YoY) and volume decline of 2% YoY. Ebitda margins contracted 450 basis points YoY largely due to higher rebates (~5% price impact) and liquidation of high-cost inventory, partly offset by an improved product mix and a lower cost of goods sold. 

Gross debt (excluding perpetual bonds) increased to Rs 284.4 billion as of March 2024 from Rs 230 billion as of March 2023. UPL's net debt (excluding perpetual bonds) increased to Rs 222 billion as of March-24 from Rs 169 billion as of March-24.

Factoring in a better-than-expected performance in Q4 and an improving operating scenario in FY25, we raise our FY25E EPS by 21% while maintaining our FY26E EPS.

Reiterate Neutral with a target price of Rs 560.

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