Shares of agrochemical giant UPL (NS:UPLL) were seen volatile this week after the company recorded a net loss of INR 443 crore for the quarter, more than double the INR 189 crore loss seen in the same period last year. Revenue from operations, however, rose by 9% to INR 11,090 crore, driven by a 16% volume increase, even as prices fell by 7% and currency rates remained flat. Despite revenue growth, the company’s profitability took a hit, with contribution margins slipping by 220 basis points to 37.7% due to intense pricing pressure in the crop protection segment.
EBITDA remained mostly unchanged at INR 1,576 crore, but the EBITDA margin contracted by 130 basis points to 14.2%, underscoring margin challenges amid rising competition and cost pressures. UPL’s shares closed at INR 515.10, down by 7.62% on Monday, leading to a market cap decline to INR 39,355 crore. The stock remains volatile with a one-year beta of 1.2 and is currently trading below key moving averages, signaling potential weakness ahead
On Tuesday, however, the stock rebounded from yesterday’s 7.6% decline, gaining 3.2% so far, retracing a bit from the day’s high of INR 552.80, as investors reacted to prospects of market recovery in the second half of FY25. UPL management expressed optimism about an improvement in margins and cash flows in the coming quarters through better inventory control and price stabilization. Brokerage Phillip Capital acknowledged UPL’s strong volume growth but pointed to continued headwinds from high inventory, pricing challenges, and subpar demand in key markets. Nonetheless, they expect a steady recovery in demand from FY25 onward, particularly as global agrochemical markets stabilize.
Kotak Institutional Equities, however, was less upbeat. While they raised their target price for UPL to INR 430, they maintained a “Sell” rating, emphasizing that any recovery in the agrochemical market would likely be gradual and that consensus earnings estimates are overly optimistic. Kotak also highlighted increased balance sheet stress and projected that UPL would need substantial margin improvement to meet FY25 targets.
In a challenging environment marked by price pressures and sector volatility, UPL is betting on a strategic second-half rebound, though analysts suggest a cautious outlook for near-term profitability. Investors can also look at what price target range all analysts are giving by simply logging into your InvestingPro+ account. And those who are still waiting to get their hands on InvestingPro+ can now avail a massive 55% discount in the Black Friday Sale!
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