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UltraTech (ULTC) posted its 2QFY2011results, which for the first time reflect the
company’s financials post the Samruddhi merger. Thus, the company’s results for
2QFY2011 are not comparable with the earlier quarters both on a yoy as well as
qoq basis. However, on a like-to-like (LTL) basis, realisations were down by 13.7%
yoy to `3,533/tonne. The decline in realisation was arrested to an extent due to
ULTC’s pan-India presence post Samruddhi merger, as the company’s exposure
to the southern region reduced from 35% pre-merger to 30% post merger.
Going ahead, we expect realisations to improve due to better demand scenario
and price hikes. We remain Neutral on the stock.
Bottom line down 81.6% yoy on LTL basis: ULTC’s top line grew by 109% yoy to
`3,245cr, in line with our estimates of a 112% yoy increase. However, on an LTL
basis, net sales declined by 9.1% yoy, while despatches grew by 5.3% yoy to
9.1mn tonnes. Operating profit was down by 10.2% yoy to `438cr, impacted by
fall in realisations, increased power costs due to higher prices of imported coal
and higher freight costs and other expenses. During the quarter, net profit
declined by 53.9%. However, on an LTL basis, net profit declined by a sharper
81.6% yoy to `116cr.
Outlook and valuation: We expect ULTC to post a 42% top-line CAGR over
FY2010–12E, aided by higher volumes. At the current levels, the stock is trading
at an EV/EBITDA of 12.7x based on FY2012E estimates. We have valued ULTC at
an EV/tonne of US $110/tonne to arrive at a fair value of `1,040. We remain
Neutral on the stock.
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