Motilal Oswal: UPL Reports Subdued Q1 Sales; Debt Remains A Concern 

Motilal Oswal Report

UPL Ltd. reported revenue decline of 1% YoY to Rs 78.3 billion (estimate Rs 86.4 billion) in Q1 FY21 (price: -1%; volume and exchange impact stood flat YoY).

Gross margins improved 20 basis point YoY to 43% on improvement in the product mix and geography mix. Ebitda margins expanded 170 basis point YoY to 22.7%, and Ebitda grew at 7% YoY to Rs 17.8 billion (estimate 18.5 billion).

Adjusted profit after tax was up 10% YoY to Rs 6.5 billion (estimate Rs 6.9 billion), aided by Ebitda growth and higher other income, offset by higher depreciation and interest cost. Note that we have excluded the contribution made toward the PM CARES Fund for Covid-19 (of Rs 750 million) from Ebitda and reported it under exceptional items.

In Q1 FY21, UPL reported strong revenue growth of 27% YoY in India versus 15% industry growth. Europe edged up 1% YoY due to supply chain delays, which resulted in a shift in revenues to Q2.

Robust business growth in Southeast Asia owing to rains and synergies led to 10% YoY growth in rest of world.

Revenue from the Latin America region declined 16% YoY on forex volatility in Brazil, which led to the postponement of orders to later quarters.

Revenue from North America declined 14% YoY on pre-buying due to Covid-19 in Q4 FY20.

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