Strong all-round Q4 show lifts UPL stock
Premium- For the year as a whole, FY21 marked decent 8% growth despite covid-led disruption
MUMBAI : UPL Ltd reported strong March quarter performance primarily led by robust sales growth in Latin America (LatAm) and India. Other geographies as Europe and the rest of the world, too, saw the growth catching pace. India sales as anticipated were strongly led by favourable crop conditions and winter crop sowing. The LatAm growth was also supported by strong volume growth on the back of catch-up of a delayed season in Brazil. The company thereby could offset the impact of unfavourable Brazilian currency movement, too. The LatAm sales growth of 40% year-on-year (y-o-y) in Q4 thereby encouraged while India sales, too, marked a strong 23% y-o-y growth. Europe and the rest of the world sales supported with 11-17% growth. The sales in the US, however, remained flat and growth was largely impacted by supply constraints.
The company’s overall revenues thereby could grow 15% in the year during Q4. For the year as a whole FY21 marked decent 8% growth despite covid-led disruption.
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1 min read . 01:19 PM ISTThe company also saw its earnings before interest, tax, depreciation, and amortization (Ebitda) grow 31% y-o-y in Q4 with margins expanding 170bps. The company said that cost synergies have augured well.
The company has had a history of turning around acquisitions. As against guided $200 million cost synergies post-Arysta Acquisition, the company has reaped cost synergies worth $235 million at the end of two years.
Moving forward business prospects remain strong with India growth likely to be supported by normal monsoon. The LatAm growth already remains supportive. Further with the rising agri commodity prices, the rising farmer incomes are to drive growth for agri-input manufacturers as UPL.
The high debt had remained a key cause of concern. The same, however, is also being addressed. UPL has reduced the gross debt and net debt by ₹5,039 crore and ₹3,140 crore respectively. The gross debt and net debt as on 31 March 2021 was ₹23,774 crore and ₹18,922 crore, respectively. The company plans further reduction and achieving a net debt to ebitda levels of less than 2x during FY22. The management has guided for 7-10% top-line growth, 12-15% ebitda growth during the year.
Overall, analysts are generally raising their forward estimates, Those at Prabhudas Lilladher Pvt. Ltd have increased revenue, ebitda and net profit estimates by 3%, 7% and 12%, respectively, for FY22 and 3%, 8% and 13% for FY23 driven by higher volumes, better sales mix and price hikes.
The stock gained more than 8% on Friday. It is currently trading at about 13 times FY22 earnings estimates.
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