UPL shares surge 7% after management maintains FY25 guidance despite challenges

Shares of UPL Ltd. surged as much as 7% on Tuesday, November 12, after the agrochemical major maintained its guidance across metrics for the full financial year despite another net loss for the September quarter.

UPL's management said that it has maintained its 50% growth guidance in its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and revenue growth to be between 4% and 8% for the year.

The company reported a net loss of ₹443 crore for the September quarter, higher than the loss of ₹189 crore it had reported in the same quarter last year.

With near-complete dealer destocking in UPL's crop protection segment, order patterns are beginning to normalise, positioning the company for margin improvement in the October-December quarter, the management said during its earnings call. Despite anticipated headwinds from commodity prices, UPL expects gradual margin accretion in the coming months.

In Brazil, UPL anticipates mid-single-digit year-on-year sales volume growth from October to March, with recent pricing pressures in crop protection products expected to ease during this period. However, UPL's average cost of debt rose to 7% in the July-September quarter, up from 6.25% a year ago.

For financial year 2026, the company expects volume growth of nearly 5% and growth in every segment, even as pricing pressures continue due to overcapacities in China.

UPL has also cut down on its rights issue size to $400 million from $500 million earlier, but is yet to receive feedback from the regulator.

ALSO READ | UPL Q2 Results: Stock falls as much as 8% after net loss widens from last year

Quarterly revenue rose by 9% to ₹11,090 crore, compared to ₹10,170 crore in the same period last year. Revenue growth was driven by a 16% year-on-year increase in volumes, offset by a 7% decline in prices and near-flat forex rates.

EBITDA remained unchanged year-on-year at ₹1,576 crore, while the EBITDA margin narrowed to 14.2% from 15.5%. The contribution margin for the quarter fell to 37.7% from 39.9% last year.

Brokerage firm Nuvama has upgraded UPL to "buy" from its earlier rating of "reduce" and raised its price target to ₹590 from ₹486 earlier. It said that the potential rights issue and value unlocking from Advanta will strengthen the company's balance sheet.

HSBC maintained its "buy" recommendation on the stock but marginally cut its price target to ₹680 from ₹700 earlier. The brokerage said that UPL is on course for recovery as further improvements are expected in the second half. Additionally, rights issue and other initiatives are levers for debt reduction and that the sharp stock correction is an overreaction.

Out of the 28 analysts that have coverage on UPL, 17 of them have a "buy" rating, six of them say "hold", while five have a "sell" rating on the stock.

Shares of UPL are trading 5.5% higher at ₹543.95. The stock is down 13% from its recent high of ₹625.

ALSO READ | UPL completes acquisition of 20% stake remaining in Indonesia's PT Excel Meg Indo for $6.85 million