UPL share price slumps 9% to touch a 52-week low on dismal Q3 results; brokerages downgrade stock; cuts target price
- UPL share price slumped over 9% to touch a 52-week low on Monday's session following the company's dismal Q3 results. Due to UPL's disappointing Q3 results, the stock has been downgraded by many brokerages.
UPL share price slumped over 9% to touch a 52-week low on Monday's session following the company's dismal Q3 results. UPL shares were among the top laggards on the Nifty 50. UPL share price today is trading at a three-year low. The UPL share price today opened at ₹507 apiece on BSE, and the UPL stock price touched an intraday low of ₹482 and an intraday high of ₹524.75. Due to UPL's disappointing Q3 results, the stock has been downgraded by many brokerages.
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“UPL has been an underperformed stock, and post-result we are seeing further weakness in the stock with price down around 9% with huge volumes. Expect further weakness, with ₹450 as the next support and ₹510 acting as resistance,” said Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One.
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UPL, a producer of sustainable agriculture goods and solutions, announced on Friday that its December 2023 quarter resulted in a consolidated loss of ₹1,217 crore. According to a regulatory filing, the company's net profit for the same quarter of the prior fiscal year was ₹1,087 crores.
Its revenue from operations dropped from ₹13,679 crore to ₹9,887 crore in the reviewed quarter, a 27.72% drop from the previous year.
“Destocking continued to weigh down the global agrochemical market. Overall, prices remained stable QoQ in the crop protection business but came off significantly vis-à-vis the high base of previous year amid intense postpatent price competition. Given this backdrop, our Q3 performance was significantly impacted by these headwinds in line with rest of the industry, which is currently experiencing its worst downturn in decades,” said Mike Frank, CEO – UPL Corporation Ltd.
Frank claimed that they witnessed a rise in revenue in the RoW area and a pickup in volumes in Latin America. In order to adapt to their operations to the new reality, the firm kept implementing cost optimisation efforts, and in Q3, SG&A expenditures decreased by 19% YoY. As of right now, they are on target to cut their SG&A by $100 million in FY25 (based on FY23 data).
"Going forward, while we are optimistic of a progressively improved performance in Q4FY24 and Q1FY25, we expect normalised business performance from Q2FY25. Our foremost priority is reducing debt. In-line with this, we have also recently announced a rights issue of upto $500 million and are exploring capital raise opportunities at platforms in addition to operational cash flows,” added Frank.
Here's what brokerages say
Kotak Institutional Equities
The brokerage claims that price erosion, rebates, and expensive raw material inventories were the main causes of UPL's 3QFY24 results, which were far worse than anticipated. The outlook is still bleak: balance sheet leverage has skyrocketed in the midst of the decline in EBITDA, and a recovery will be extremely sluggish and require several quarters.
“We cut FY2024E-26E EPS by 47-167%, revise our March 2025 FV to ₹390 (from ₹550), and downgrade the stock to SELL from REDUCE.” the brokerage said.
Nuvama Institutional Equities
The brokerage claimed that UPL once more delivered unsatisfactory results, consistently losing money, far less than expected and in line with consensus. A net loss of ₹12 billion resulted from higher borrowing costs, FX losses, and decreased operational leverage, while GM degradation of 1,670bp to 36% wiped out EBITDA by 86% YoY to ₹4.1 billion. The brokerage expect a risk of credit rating downgrades and strain on the balance sheet, even if margin pressure—amidst declining RM prices and larger discounts to collect payments—shall lessen in FY25.
“UPL has plans to raise money through a rights issue, but we are downgrading the stock to ‘REDUCE’ (from ‘BUY’) given near-term risk. We are slashing FY24E and FY25 EPS by 36%, which drags target price to ₹486 (from ₹718) based on 11x FY26E EPS,” the brokerage said.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
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