UPL gains 5% as Board to mull share buyback plan on March 2

Shares of UPL climbed 5 per cent to Rs 664 on the BSE in Friday's intra-day trade after the agrochemicals company announced that its board will consider share buyback proposal on Wednesday, March 2, 2022.

"A meeting of the board of directors of the Company is scheduled to be held on Wednesday, 2nd March, 2022 inter-alia to consider a proposal for buyback of fully paid-up equity shares of the Company," UPL said in an exchange filing on Thursday after market hours. The stock ended 8 per cent lower at Rs 632 yesterday.

The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings (P/E) multiple.

In the past one week, the stock of UPL has corrected 13 per cent as compared to 6 per cent decline in the S&P BSE Sensex till Thursday. It has fallen 27 per cent from its 52-week high level of Rs 864.75 on June 8, 2021.

For October-December quarter (Q3FY22), UPL reported 61 bps points decline in its earnings before interest tax and depreciation and amortization (EBITDA) margin at 23.6 per cent. However, EBITDA grew 21 per cent year-on-year (YoY) at Rs 2,666 crore against Rs 2,209 crore in Q3FY21. The company said in-house manufacturing with backward integration linkages supported by effective raw material sourcing and overall cost management helped in keeping the EBITDA margins largely intact, despite the higher input costs and a sharp rise in freight charges.

UPL's Q3FY22 revenue witnessed robust growth of 24 per cent YoY to Rs 11,297 crore, led by healthy growth in volumes (+11 per cent) and better product realizations (+13 per cent). Net profit grew by 18 per cent YoY at Rs 937 crore.

Based on the 9MFY22 performance and expectations of a strong performance in Q4, UPL's management expects to outperform their earlier FY22 guidance of revenue/EBITDA growth of 7-10 per cent/12-15 per cent. "We believe that UPL's focus on innovation will drive growth through differentiated offerings in high-growth markets, along with product introductions from its collaborations with Meiji and FMC," analysts at Emkay Global Financial Services said in a result update.

Technical View 

Overall bias down, stock in pull-back mode

Upside Potential: 6%

Resistance: Rs 670

The stock has cracked more than 26 per cent in little more than a month, and currently trades below all its significant daily moving averages (20-DMA, 50-DMA, 100-DMA and 200-DMA) on the daily charts.

On Thursday, the stock dropped over 8 per cent and closed below the lower-end of the Bollinger Band on the daily charts, underlining the weak trend at the counter. The RSI too dipped below the 30-mark, thus indicating oversold condition. Now, given the news driven positive sentiment, the stock is likely to attempt a pull-back from the oversold zone.

The pullback rally may face some resistance around Rs 670-odd level, above which the stock can rally towards Rs 700. The overall bias remains negaitve, with the possibility of the stock falling back towards Rs 600-mark, which is were the 100-WMA (Weekly Moving Average) stands.

(With inputs from Rex Cano)