Q3 Preview | UPL to see strong growth in Q3 earnings, driven by North America, Latin America markets

UPL, a crop protection products manufacturer with a presence in 138 countries, is likely to report a 17 percent year-on-year increase in consolidated revenue in the December quarter, led by growth in North America and Latin America.

The company’s consolidated revenue will climb to Rs 13,177 crore for the three months ended December, according to the average of estimates of brokerage houses polled by Moneycontrol. The company will report its quarterly earnings on January 31.

Revenue growth is likely to be led by the Latin American and North American regions, while growth in Europe is likely to remain subdued amid challenging market conditions, according to Kotak Institutional equities. India and the rest of the world are expected to report low double-digit revenue growth.

Analysts at Phillip Capital attribute favourable agronomic conditions and higher crop prices leading to strong growth in Latin America and assume a 25 percent Y-o-Y growth there.

“North America/India/RoW expected to see 20 percent/15 percent/10 percent growth supported by mixed-to-favourable weather conditions. However, Europe expected to report 5 percent degrowth led by dry weather and drought,” they said in a report.

According to the poll, the company’s EBITDA margin may contract to 22.5 percent from 23.6 percent from a year earlier, while it will almost remain flat sequentially. EBITDA is projected to grow 12 percent Y-o-Y to Rs 2,972 crore and 7 percent sequentially.

“An adverse shift in revenue mix – away from the higher-margin Europe region and toward the lower margin LATAM region – should weigh on gross margins, while FIFA 2023 World Cup sponsorship spending this quarter also further impacts EBITDA margin. Increased finance costs will be a drag on PAT growth,” Kotak said.

The reported PAT (Profit after tax) will likely register an average growth of 49 percent Q-o-Q to reach Rs. 1,208 crore. Brokers have provided varied projections with analysts at Kotak institutional equities and Motilal Oswal estimating a sequential PAT growth of 15 percent and 76 percent respectively.

Raw material price trends, debt levels and capex plans are the key monitorable indicators, according to experts at Motilal Oswal, who see revenue and EBITDA growing at 18 percent and 20 percent respectively.UPL shares gained 0.3 percent to Rs 746.90 at 12.09 p.m. on the National Stock Exchange.