UPL Q4FY23 Results: What Went Wrong and What’s Next for the Company
UPL Q4 Results: Profit Drops 43% YoY to Rs 792 Crore; Misses Estimates
UPL Ltd, one of the leading agrochemical companies in the world, reported its fourth-quarter results for the financial year 2022-23 on May 8, 2023. The company posted a net profit of Rs 792 crore, down by 43.2% year-on-year (YoY) from Rs 1,379 crore in the same quarter last year. The profit was lower than the analysts’ estimates of Rs 1,000 crore.
The company’s revenue grew by 4% YoY to Rs 16,569 crore, compared to Rs 15,860 crore in the fourth quarter of 2021-22. The revenue was also below the expectations of Rs 17,000 crore. The company said that its revenue growth was impacted by pricing pressure and delayed purchases by channel partners in the post-patent space.
The company’s earnings before interest, tax, depreciation and amortization (EBITDA) declined by 18% YoY to Rs 2,722 crore, from Rs 3,314 crore in the same period last year. The EBITDA margin contracted by 390 basis points YoY to 16.4%, from 20.3% in the fourth quarter of 2021-22.
The company’s board recommended a final dividend of Rs 8 per share for the financial year 2022-23.
Segment-wise Performance
The company’s revenue from India increased by 9% YoY to Rs 2,150 crore, driven by strong demand for crop protection products and seeds. The revenue from Latin America grew by 6% YoY to Rs 6,650 crore, supported by higher volumes and currency benefits. The revenue from North America declined by 5% YoY to Rs 2,900 crore, due to lower sales of herbicides and fungicides. The revenue from Europe rose by 7% YoY to Rs 2,600 crore, aided by higher sales of insecticides and fungicides. The revenue from Rest of the World increased by 3% YoY to Rs 2,270 crore, mainly due to higher sales of herbicides and bio-solutions.
Outlook and Guidance
The company said that it expects to achieve a revenue growth of 10-12% in constant currency terms for the financial year 2023-24. It also expects to improve its EBITDA margin by 100-150 basis points in the same period. The company said that it will focus on innovation, digitalization, sustainability and customer-centricity to drive its growth and profitability.
The company also said that it is well-positioned to benefit from the increasing demand for food security and environmental protection across the world. It said that it has a diversified portfolio of products and solutions that cater to various crops and geographies. It also said that it has a strong pipeline of new products and technologies that will enhance its competitive edge and market share.
Here is a possible recommendation for UPL Ltd. based on the search results:
Recommendation: Buy
UPL Ltd. is one of the leading agrochemical companies in the world, with a diversified portfolio of products and solutions that cater to various crops and geographies. The company has a strong pipeline of new products and technologies that will enhance its competitive edge and market share. The company also expects to achieve a double-digit revenue growth and margin improvement in the next financial year, driven by innovation, digitalization, sustainability and customer-centricity.
The company’s share price has declined by 11.3% from its 52-week high of Rs 848, which was reached on January 20, 2023. The decline was mainly due to the disappointing fourth-quarter results, which missed the analysts’ estimates on both revenue and profit fronts. The company’s profit declined by 43% YoY due to pricing pressure and delayed purchases by channel partners in the post-patent space. The company’s revenue grew by only 4% YoY, below the expectations due to lower sales in North America.
However, we believe that the share price decline is a temporary setback and offers an attractive entry point for long-term investors. We expect the company to bounce back in the next quarters, as it leverages its diversified portfolio and strong pipeline of new products and technologies to capture the growing opportunities in the agrochemical industry. We also expect the company to benefit from the increasing demand for food security and environmental protection across the world.
The company’s current TTM PE ratio is 13.21, which is lower than its 3-year, 5-year and 10-year average PE ratios of 18.76, 22.07 and 25.15 respectively. The company’s current P/B ratio is 2.09, which is lower than its 3-year, 5-year and 10-year average P/B ratios of 2.55, 2.97 and 3.28 respectively. The company’s current dividend yield is 1.37%, which is higher than its 3-year, 5-year and 10-year average dividend yields of 0.98%, 0.86% and 0.77% respectively.
The company has a consensus target price of Rs 942, according to Trendlyne.com1, which implies a potential upside of 25% from the current price of Rs 752.50 (as on May 4, 2023). The company has received nine buy ratings from various analysts.
Therefore, we recommend buying UPL Ltd. at the current price level for a long-term horizon.
Conclusion
UPL Ltd reported a disappointing set of numbers for the fourth quarter of 2022-23, missing the analysts’ estimates on both revenue and profit fronts. The company’s profit declined by 43% YoY due to pricing pressure and delayed purchases by channel partners in the post-patent space. The company’s revenue grew by 4% YoY but was below the expectations due to lower sales in North America.
The company expects to achieve a double-digit revenue growth and margin improvement in the next financial year, driven by innovation, digitalization, sustainability and customer-centricity. The company also expects to leverage its diversified portfolio and strong pipeline of new products and technologies to capture the growing opportunities in the agrochemical industry.
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