UPL shares trade marginally higher on hopes of robust Q4 earnings

Shares of UPL Ltd traded marginally higher in early trade on May 8 in anticipation of the company’s January-March earnings, due for release later today. Most analysts on the Street expect UPL to deliver a better performance as compared to industry peers, but Q4 growth is likely to remain tepid for the agri-input company.

At 10.49 am, shares of UPL were trading 0.65 percent higher at Rs 719.50 on the National Stock Exchange.

According to ShareKhan by BNP Paribas, UPL is likely to defy the subdued industry trend during Q4 and put up a better show, thanks to its global market exposure and the advantage of backward integration.

Despite expectations of outperformance as against industry peers, brokerage firm Kotak Institutional Equities (KIE) sees just a modest 6 percent year-on-year revenue growth on a consolidated basis for UPL, driven primarily by Latin America and India business which will offset sluggish growth in the mature, developed markets (US and Europe).

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Nonetheless, such growth on the revenue front implies 17 percent on year increase for FY23 overall, topping the company’s revenue guidance range of 12-15 percent.

On the other hand, ShareKhan by BNP Paribas anticipates flattish fourth quarter operating profit margin for agri-input company. The firm sees operating profit margin at 22.2 percent for the January-March period, a decline of 45 basis points on year from 22.6 percent in the corresponding quarter last year.

The agri-input company is seen recording a net profit of Rs 1,718 crore in Q4, reflecting an 11 percent rise from Rs 1,547 in the same quarter in FY22.

Apart from Q4 earnings, KIE also expects UPL to reduce debt during the quarter under review, consistent with the usual seasonal pattern. “Nonetheless, it remains to be seen if the company succeeds in meeting its guidance for $500 mn of net debt reduction on a year-on-year basis,” KIE highlighted in its report.

Likewise, the firm believes the progress in deleveraging the balance sheet will be a key monitorable for UPL Ltd.

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