UPL shares tank post a disappointing Q4, should you buy or sell?
- On Tuesday, the shares of UPL Ltd closed 2.77 per cent down at ₹694.95 on BSE.
The shares of agri-input company UPL Ltd was down by nearly 3 per cent on Tuesday. The company on Monday reported 42.56 per cent decline in consolidated net profit at ₹792 crore for quarter ended March as against ₹1,379 crore in the year-ago period.
The muted quarter was majorly due to post-patented product prices with ramp-up of supply from China as well as lower sales in North America.
On Tuesday, the shares of UPL Ltd closed 2.77 per cent down at ₹694.95 on BSE. On a year-to-date basis the company's share declined by 3.72 per cent and in the last one year the stock was down by 12.06 per cent.
The revenue from operation grew 4.46 per cent to ₹16,569 crore as compared with ₹15,861 crore in the year-ago period.
"We delivered a resilient set of results for FY23 despite facing significant headwinds in the final quarter...We reduced our gross debt by over USD 600 million and net debt by USD 440 million driven by improved cash flow from operations and a leaner working capital cycle," UPL Chairman and Group CEO Jai Shroff said.
He said, in line with the company's priority of creating shareholder value, UPL created distinct pure play platforms during the year to bring in enhanced focus and operational freedom to pursue independent growth strategies thereby unleashing the growth potential of each of UPL's distinct platforms.
Brokerage firm Motilal Oswal said that UPL has reported muted 4QFY23 revenue growth of 4% YoY, primarily led by decline in post-patented product prices with ramp-up of supply from China as well as lower sales in North America (down 14% YoY). It has given a neutral recommendation at a target price of ₹750.
“Operating performance deteriorated (down 16% YoY) due to liquidation of high-cost inventory, idle capacity costs (INR2.0-2.5b) to achieve competitive inventory position and unfavorable region mix (rise in share of LATAM). Factoring in UPLL’s weak 4QFY23 performance, we cut our FY24E/FY25E earnings by 13%/9%. We reiterate our Neutral rating with a TP of INR750,” said brokerage Motilal Oswal.
While brokerage ICICI Direct said, "We model UPL to report revenue and PAT CAGRs of 7.7% and 17.3% respectively over FY23-FY25E. We model RoCE to remain above cost of capital over FY24-25. Maintain ADD on the stock with a DCF-based target price of Rs800 (implied P/E 10x of FY25E EPS).
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