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UltraTech’s net earnings declined 36% YoY to Rs3.2bn, 12% below
estimates. While an improvement in cement pricing in south helped as
realisations rose 9% QoQ, pressures continued as Ebitda declined 28%
YoY. Unit costs almost remained flat sequentially, though, we expect cost
headwinds (fuel, freight) in the coming quarters. We cut our EPS
estimates by 6-11% over FY11-13CL to factor in lower 3Q and as we
revise up our imported coal price estimates by 4-17% (in line with
revisions by our resources team). Maintain Upf.
3Q earnings 12% below estimates
UltraTech’s 3Q net earnings came in at Rs3.2bn, 12% below estimates and
adjusting for Samruddhi merger, were down 36% YoY. Ebitda declined 28%
(8% below) and margins came in at Rs720/t (-30%YoY/+60%QoQ). While
overall volumes (9.9mt; +1% YoY) were broadly in-line, cement realisations
(Rs164/bag; +9% QoQ) were 1.5%below estimates. Overall costs were in
line; unit freight rose 4% QoQ while power & fuel costs were only marginally
up. Interest, other income and tax rates were broadly in-line.
Pricing discipline in south led to QoQ improvement in realisations
Despite weak demand-supply balance in the industry, UltraTech’s cement
realisations rose 9% QoQ, thanks to producer discipline in south (and west);
we estimate a 15-30% QoQ rise in south/ west which is partially offset by a
7-10% decline in north, east and central. Seasonal factors and industry
discipline should help prices in the near-term and we continue to model ~8%
QoQ improvement in 4Q. We however do not expect discipline to last for long
and expect pricing pressures to continue in the medium term.
Cost pressures would impact from 4Q; raise our coal px estimates
Despite a sharp rise in imported coal prices, UltraTech’s power & fuel cost
rose only marginally, thanks to low cost coal inventory. We note that imported
coal prices have moved up ~35% in the last three months and the impact
would be visible from 4Q (~35% imported coal mix). We also revise up our
imported coal cost estimates to US$125/t and US$115/t for FY12-13CL (4-
17% increase), in line with revisions made by our resources team. Recent rail
freight hike (+4% in Dec; mix: ~40%) would also impact cost base from 4Q.
Cut estimates by 6-11%; maintain Upf
We cut our EPS estimates by 6-11% to account for lower 3Q and increase our
cost estimates (partially offset by higher sales volumes). We remain
concerned on the sector fundamentals and expect margin pressures to
continue; maintain Upf rating on the stock (target: Rs975/sh).
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UltraTech’s net earnings declined 36% YoY to Rs3.2bn, 12% below
estimates. While an improvement in cement pricing in south helped as
realisations rose 9% QoQ, pressures continued as Ebitda declined 28%
YoY. Unit costs almost remained flat sequentially, though, we expect cost
headwinds (fuel, freight) in the coming quarters. We cut our EPS
estimates by 6-11% over FY11-13CL to factor in lower 3Q and as we
revise up our imported coal price estimates by 4-17% (in line with
revisions by our resources team). Maintain Upf.
3Q earnings 12% below estimates
UltraTech’s 3Q net earnings came in at Rs3.2bn, 12% below estimates and
adjusting for Samruddhi merger, were down 36% YoY. Ebitda declined 28%
(8% below) and margins came in at Rs720/t (-30%YoY/+60%QoQ). While
overall volumes (9.9mt; +1% YoY) were broadly in-line, cement realisations
(Rs164/bag; +9% QoQ) were 1.5%below estimates. Overall costs were in
line; unit freight rose 4% QoQ while power & fuel costs were only marginally
up. Interest, other income and tax rates were broadly in-line.
Pricing discipline in south led to QoQ improvement in realisations
Despite weak demand-supply balance in the industry, UltraTech’s cement
realisations rose 9% QoQ, thanks to producer discipline in south (and west);
we estimate a 15-30% QoQ rise in south/ west which is partially offset by a
7-10% decline in north, east and central. Seasonal factors and industry
discipline should help prices in the near-term and we continue to model ~8%
QoQ improvement in 4Q. We however do not expect discipline to last for long
and expect pricing pressures to continue in the medium term.
Cost pressures would impact from 4Q; raise our coal px estimates
Despite a sharp rise in imported coal prices, UltraTech’s power & fuel cost
rose only marginally, thanks to low cost coal inventory. We note that imported
coal prices have moved up ~35% in the last three months and the impact
would be visible from 4Q (~35% imported coal mix). We also revise up our
imported coal cost estimates to US$125/t and US$115/t for FY12-13CL (4-
17% increase), in line with revisions made by our resources team. Recent rail
freight hike (+4% in Dec; mix: ~40%) would also impact cost base from 4Q.
Cut estimates by 6-11%; maintain Upf
We cut our EPS estimates by 6-11% to account for lower 3Q and increase our
cost estimates (partially offset by higher sales volumes). We remain
concerned on the sector fundamentals and expect margin pressures to
continue; maintain Upf rating on the stock (target: Rs975/sh).
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