| – | Decline in post patent product prices with ramp up of supply from China, idle capacity costs to achieve competitive inventory position, and unfavourable regional mix (increase in share of LATAM) significantly impacted contribution margins in Q4. |
|---|---|
| – | Leaner inventory to support UPL to capture growth opportunities in FY24. |
| – | UPL SAS’ delivered 16% YoY revenue growth and 31% EBITDA growth. ‘Advanta’ reported 12% YoY revenue growth, but a 5% YoY decline in EBITDA primarily due to higher fixed overheads and R&D expenses. |
| – | Lower Receivables and Inventory Days led to reduced 5 WC days. |
| – | Outlook: FY24 Revenue growth guidance: 4-8%. EBITDA Growth: 6-10%. Prices of post patented products likely to normalize after H2FY24. Margins are expected to remain under pressure but are taking various measures to control costs. Revenue/EBITDA guidance for various business segments are UPL Corporation (4%-8%/6%-10%) UPL SAS (12%-16%/14%-18%) Advanta Enterprises (11%-15%/14%-18%) and specialty chemical manufacturing (10%-14%/12%-16%) RoCE is expected to increase by 125-175 bps in FY 24. LATAM and Africa business is expected to grow rapidly than mature markets. Momentum in Launch is expected in FY24. The management guided capex for FY 24 to be total USD 350 mn of which USD 160 mn will be spent on manufacturing, USD 20 mn on Advanta business, and the rest will be utilised on intangible assets for the company’s global crop protection business. The net Debt to EBITDA ratio for FY 23 was 1 5 x and management is comfortable with this However, the management aims to reduce it to 1 x in the future It indicated that the free cash flows generated in the future will be used to repay the debt |
| – | Headwinds: Pricing challenges, Challenges in volume growth due to excess supply from China, Product bans in South Europe. |
| – | Tailwinds: Strong Farm Gate demand, increased demand for bio-solutions, continued ramp up of new, innovative products. |
| – | EBITDA has been adversely impacted due to various factors, such as one time idle capacity costs of INR2000–2500mn, inventory losses of INR3000 3500mn, an unfavourable regional mix and lower post patent product prices. However, the company expects improvement in the EBITDA margin, driven by a revival in agrochemical prices in H2FY24 and an increase in share from differentiated products. |
| – | Brokerages are expecting FY24/FY25 revenues to be 57700 crs & 65200 crs. Expected EPS for the respective years is Rs. 55.9/Rs. 73. |
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