UPL Shares Edge Higher on Hopes of Strong Q4 Earnings

UPL opened the current session at Rs 715.05.

Shares of UPL Ltd edged higher in early trade on May 8 in anticipation of the company’s January-March earnings due later today. Most analysts on Wall Street expect UPL to deliver better results than its industry peers, but the agricultural inputs company’s fourth-quarter growth may remain tepid.

Shares of UPL were up 0.65% at Rs 719.50 at 10.49 am on the National Stock Exchange.

According to ShareKhan of BNP Paribas, UPL will likely break the sluggish industry trend and perform better in the fourth quarter, thanks to its global market exposure and backward integration advantages.

Despite expected better results than industry peers, brokerage Kotak Institutional Equities (KIE) sees UPL’s consolidated revenue growing only modestly at 6% year-on-year, driven mainly by Latin America and India, which will offset slow growth in mature, developed markets (US and Europe).

Nonetheless, such revenue growth would imply overall FY23 growth of 17% YoY, above the company’s 12-15% revenue guidance range.

On the other hand, BNP Paribas’ ShareKhan expects the agricultural inputs company’s operating margin to be flat in the fourth quarter. The company forecast an operating margin of 22.2% for the January-March period, down 45 basis points from 22.6% a year earlier.

The agricultural inputs company is expected to post a net profit of Rs 1,718 crore in the fourth quarter, up 11% from Rs 1,547 crore in the same period in FY22.

In addition to the fourth-quarter earnings, KIE expects UPL to reduce its debt in the current quarter, which is in line with the usual seasonal pattern. “Nevertheless, it remains to be seen whether the company can successfully achieve its goal of reducing net debt by $500 million year-on-year,” KIE emphasized in its report.

Likewise, the firm believes that the progress of balance sheet deleveraging will be a key monitor for UPL Ltd.

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