Agrochemical player UPL is expected to post a weak set of earnings for the first quarter of FY24 on July 31, dragged by a late onset of monsoon, and lukewarm global demand due to destocking of high-cost inventory.
Along with that, volumes are also likely to remain weak, primarily on account of increased supply pressure from China.
A poll of brokerages collated by Moneycontrol pegged its sales at Rs 9,790 crore, down 9.5 percent from Rs 10,821 crore clocked in the base quarter. Brokerages also attributed the steep price corrections in UPL’s generic portfolio as the cause behind the expected fall in revenue.
Analysts predict that in the quarter under review, specific markets such as North America, Europe, Brazil, and India will likely experience weakness. However, Asia, excluding India, Latin America, excluding Brazil, and the rest of the world (RoW) region are expected to perform relatively better during the same period.
Net profit for the quarter is also likely to slump sharply by 72 percent on-year to Rs 262 crore from Rs 955 crore. Prabhudas Lilladher anticipates higher forex losses and taxes to weigh on UPL's bottomline too.
The company is also likely to report a steep decline in its operating profit margins for the quarter under review. "Generic prices have dropped by 10–25 percent across products, leading to a fall in realisation. Increased supply of many chemicals from China and muted demand are impacting the generic prices," Nuvama Institutional Equities said in a report.
Apart from that, pricing pressure and carry-over of high-cost inventory will also drag UPL's EBITDA margin down, Nirmal Bang Institutional Equities said in its report. UPL's EBITDA margin stood at 21.6 percent in the corresponding quarter last fiscal. It is worth noting the EBITDA for UPL will be calculated after forex adjustment.
During the previous quarter, UPL's performance remained under pressure due to lower product prices and delays in the planting season. Additionally, the company's margins were negatively affected by challenges in the post-patent sector.
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