Ultratech Cement Ltd. Numbers Disappoint. Maintain REDUCE :: Emkay

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Ultratech Cement Ltd.

Numbers Disappoint. Maintain REDUCE

REDUCE

CMP: Rs1100                                        Target Price: Rs1040

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n     PAT at Rs1.16 bn (-79.2% qoq) – below estimates led by lower realizations & higher P&F & staff costs. Revenues decline 19.4% qoq-volumes down 12.4%, realisations down 8%

n     Lower realizations and cost pressure dragged EBIDTA down by 59% qoq. EBITDA/t at Rs448 down 53.4% qoq. Downgrade FY11 earnings by 16.2% (EPS Rs54.8)

n     With recent cement prices hikes, expect the worst phase of profitability to be over for UTCL

n     Upgrade target to Rs1040 (valuing UTCL at EV/EBIDTA of 8X EV/Ton of USD130. However rich valuations at PER of 16.6X & EV/ton of USD135 leaves little upside. Maintain REDUCE

Revenues decline 19.4% qoq

UTCL revenues (Rs32.15bn) for the quarter declined 19.4% qoq, led by severe

pressure on realization (blended), which was down 8% qoq to Rs3533/ton (our

estimates Rs3604/t), and 12.4% qoq decline in volumes at 9.1 mt. White cement

revenues stood at Rs970mn while RMC reported revenues of Rs2830mn.

Cost pressures drag EBIDTA down by 59.2%- below estimates

EBITDA for the quarter at Rs4.07bn declined 59.2%qoq, below our estimates of

Rs4.46bn.The quarter witnessed severe cost pressures as raw material costs per ton

have increased 16.8% yoy to Rs 519/t whereas P&F per ton increased 19.8%yoy and

8% qoq to Rs 927/t(our estimate of Rs845/t).This was due to higher imported coal

contract prices which rose from USD76 to USD110 increasing the cost. Employee costs

increased 14.4%qoq to Rs1.9bn (our estimate of Rs1.66bn) and consequently total cost

per tonne increased 7.2%qoq to Rs3085/t as against our estimate of Rs3036/t).

EBITDA/t at Rs448 down 53.4%qoq

With sharp fall in realization and escalating cost pressures, Ultratech’s EBITDA/t at Rs

448 (our estimate of Rs491/t) declined 53.4%qoq. Overall EBITDA margins contracted

1237bps to 12.7%. These levels of profitability were last seen in FY2006 (EBITDA/t of

Rs290).

Net Profit down 79.2%qoq

Net profit at Rs1.16bn, as against our estimate of Rs2.19bn, declined 79.2%qoq.

Interest charges increased 7.4%qoq whereas deprecation increased 2.4%qoq.