Goldman Sachs, Ultratech Cements (ULTC.BO): Maintain Neutral

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Ultratech Cements (ULTC.BO): Maintain Neutral
Pan-India exposure: After a weak FY11, in which Ultratech reported volume growth of
3.2%, we now expect 11% volume growth in FY12E, translating into 81% utilization rate
(including Star Cement).
Margins bottom out: We believe that the EBITDA margins will bottom out at 20.9%
(EBITDA/T of Rs 828) in FY11E and we expect a gradual pick up in margins to 22.6%
(EBITDA/T of Rs922) in FY12E on higher realizations.
Strong earnings growth as cement volumes and margins pick up: We expect a 69% yoy
growth in FY12E EPS to Rs69.59 on account of high operating leverage from volume
growth, price increase and margin recovery.


Maintain Neutral on reasonable valuations: We revise our FY11E-FY13E EPS by -7% to
+4% on revised volume, pricing and cost assumptions. At 115% EV/RC, valuations appear
reasonable. We revise our 12-m EV/RC-based TP to Rs1,097 (from Rs906) on higher
replacement cost.
Key risks: upside: sustained strength in pricing; downside: higher coal costs and lowerthan-
expected increase in volumes.