Chemical stock jumps 7% after the management’s guidance of over 50% for FY25
Chemical stock jumps 7% after the management’s guidance of over 50% for FY25
The shares of this agrochemical stock engaged in the business of industrial chemicals, agrochemicals, specialty chemicals, chemical intermediates, and production after the company maintained its EBITDA guidance of over 50% for FY25.
Share Price Movement
The share price of UPL Ltd closed at Rs. 527.15 and touched a day’s high of Rs.552.70 per share on Tuesday’s intraday trade, which rose 7 percent from its previous close of Rs.515.10 per share. However, the shares have adjusted and closed at 2.34 percent higher than the previous closing price.
What Happened
The stock movement in the scrip was due to guidance released by the management of the company. The guidance posted a significant increase in net profits and a jump in revenue in Q2FY25.
In its post-earnings call, management expressed confidence in achieving its EBITDA and net debt targets for FY25 which is driven by strong volume growth. The company expects its flagship crops business to outperform industry growth, as destocking is largely complete and prices have stabilized.
Management reaffirmed its FY25 guidance, forecasting revenue growth of 4-8 percent and EBITDA growth of over 50 percent, citing the end of high-cost inventory liquidation.
For FY26, UPL anticipates a 5 percent volume growth and improvement across all segments, despite ongoing pricing pressures from overcapacity in China.
Additionally, UPL has reduced the size of its planned rights issue to $400 million, down from the previously planned $500 million, though it is still awaiting regulatory feedback.
Financials
According to its recent filing, In Q2FY25, UPL Ltd reported a 9 percent increase in revenue to Rs.11,090 crore in Q2FY25, compared to Rs.10,170 crore in Q2FY24. Furthermore, quarterly, the company saw an increase of 22.31 percent in revenue from Rs.9,067 crore in Q1FY25.
In the same period, the company reported an increase in net losses to Rs.585 crore in Q2FY25, as losses widened from Rs.293 crore in Q2FY24 and stayed consistent from a loss of Rs.527 crore in Q1FY25.
The company has a current ratio of 1.35, a debt-to-equity ratio of 1.23, and a price-to-sales of 0.90 currently.
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Revenue Mix
The company earns 84.65 percent from Crop protection, 9.97 percent from the Seeds business, and 5.36 percent from Non-agro as of Q2FY25. Most of the profits are derived from crop protection.
Shareholding Pattern
As of September 2024, the shareholding pattern includes promoters holding a share of 32.51 percent stake in UPL, Foreign Institutional Investors (FII) holding around 34.22 percent, Domestic Institutional investors (DII) standing at 17.64 percent, and public holdings standing at 15.59 percent.
Target Recommendation
Nuvama has upgraded its rating from reduce to buy for UPL and gave a target recommendation of Rs. 590 which is 12 percent higher. HSBC maintained its buy price from Rs. 700 slightly cut down to Rs. 680 and retained a buy call on the scrip which is 29 percent higher than the previous closing price.
About the company
UPL Limited, formerly known as United Phosphorus Limited is into agrochemicals, specialty chemicals, and industrial chemicals. The company was founded in 1969 and is headquartered in Mumbai. They operate in over 130 countries, providing a diverse range of products including seeds, pesticides, and plant growth regulators.
Their business model focuses on leveraging a robust R&D framework and strategic acquisitions, such as Arysta LifeScience. They aim to empower farmers with effective solutions while ensuring food security and environmental sustainability.
Written by – Santhosh S
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