Shares of UPL hit an over two-year low of Rs 590.10, as they slipped 5 per cent on the BSE in Thursday’s intra-day trade after the company reported a weak set of numbers for the June quarter (Q1FY24).
The stock of pesticides & agrochemicals company was trading at its lowest level since March 2021. Thus far in the calendar year 2023, it has underperformed the market by falling 17 per cent, as compared to 7.3 per cent rally in the S&P BSE Sensex.
For Q1FY24, UPL reported a sharp 81 per cent year-on-year (YoY) decline in its net profit at Rs 166 crore, due to lower operational income. The company had reported net profit of Rs 877 crore in a year ago quarter. Revenue was down 17 per cent YoY to Rs 8,963 crore impacted by the industry-wide slow down.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 32 per cent YoY at Rs 1,593 crore, while reported margin contracted 387 bps at 17.8 per cent from 21.6 per cent.
The management said the global agrochemical industry has been going through a challenging phase over the last two quarters as distributors prioritized destocking and focused on tactical purchases amid high channel inventories. Additionally, the market is witnessing pricing pressure given the high base of previous year and aggressive price competition seen from the Chinese post patent exporters.
Going forward, while the management anticipates demand to remain subdued in Q2FY24 as well, the company’s performance should be sequentially better. The management is optimistic of demand recovery in H2FY24 as the channel inventory approaches a new normalized level. “Overall, led by improved demand and cost optimization efforts, we expect our Revenue and EBITDA growth to turn positive in H2FY24, with full year Revenue growth to now be in the range of 1-5 per cent with EBITDA growth at 3-7 per cent,” the management said.
Analysts at ICICI Securities cut FY24E earnings by 13 per cent to factor in weak Q1FY24 and weak market conditions.
“While UPL has reported weaker-than-expected Q1FY24, we note (1) farmer offtake has remained intact and it will eventually result in revival in volume growth in H2FY24, (2) Seeds segment continues to report strong performance with volume growth of 14 per cent YoY, indicating healthy farming activity and (3) India crop protection business suffered due to shift in agri season and delay in monsoon; we believe it is likely to recover in Q2FY24,” the brokerage firm said in its result update.
The stock of pesticides & agrochemicals company was trading at its lowest level since March 2021. Thus far in the calendar year 2023, it has underperformed the market by falling 17 per cent, as compared to 7.3 per cent rally in the S&P BSE Sensex.
For Q1FY24, UPL reported a sharp 81 per cent year-on-year (YoY) decline in its net profit at Rs 166 crore, due to lower operational income. The company had reported net profit of Rs 877 crore in a year ago quarter. Revenue was down 17 per cent YoY to Rs 8,963 crore impacted by the industry-wide slow down.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 32 per cent YoY at Rs 1,593 crore, while reported margin contracted 387 bps at 17.8 per cent from 21.6 per cent.
The management said the global agrochemical industry has been going through a challenging phase over the last two quarters as distributors prioritized destocking and focused on tactical purchases amid high channel inventories. Additionally, the market is witnessing pricing pressure given the high base of previous year and aggressive price competition seen from the Chinese post patent exporters.
Going forward, while the management anticipates demand to remain subdued in Q2FY24 as well, the company’s performance should be sequentially better. The management is optimistic of demand recovery in H2FY24 as the channel inventory approaches a new normalized level. “Overall, led by improved demand and cost optimization efforts, we expect our Revenue and EBITDA growth to turn positive in H2FY24, with full year Revenue growth to now be in the range of 1-5 per cent with EBITDA growth at 3-7 per cent,” the management said.
Analysts at ICICI Securities cut FY24E earnings by 13 per cent to factor in weak Q1FY24 and weak market conditions.
“While UPL has reported weaker-than-expected Q1FY24, we note (1) farmer offtake has remained intact and it will eventually result in revival in volume growth in H2FY24, (2) Seeds segment continues to report strong performance with volume growth of 14 per cent YoY, indicating healthy farming activity and (3) India crop protection business suffered due to shift in agri season and delay in monsoon; we believe it is likely to recover in Q2FY24,” the brokerage firm said in its result update.