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UBS Investment Research
UltraTech Cement
4 Q FY11: Good numbers
4Q FY11: Operating performance ahead of UBS-e
Ultratech reported net sales of Rs45.6bn (+139% y/y, +22% q/q; UBS-e Rs45.8
bn), operating profit of Rs10.9bn (+170% y/y, +48% q/q; UBS-e Rs10.7bn and
ahead of consensus estimate of Rs9.8bn). The reported PAT is Rs7.3bn (up 218%
y/y, +128% q/q). The numbers are ahead of estimates, mainly due to lower
depreciation & interest cost and a reversal of tax provision of Rs1.1bn. Domestic
cement and clinker volumes grew 11% q/q to 10.37mt (6% above UBS-e).
EBITDA margin in line with UBS-e despite rising input costs
The freight costs, raw material costs and power & fuel costs rose 12%, 22% and
45% y/y respectively. The company attributes the rise in fuel costs mainly to a
27% & 30% y/y increase in imported & domestic coal prices respectively.
However, the company managed to maintain its EBITDA margin at 23.9% (UBS-e
23.5%), due to higher realisations. Overall, Cement realisation improved 31% y/y
vs. 27% y/y rise in operating expenses.
Improvement in cement volumes
Domestic cement & clinker sales of grey cement was up 1.5% y/y to 32.76mt in
FY11, while white cement volumes grew by 3% to 4.14mt and wall care putty
volumes 28% to 2.3mt. Q4 volumes were 10.37mt (+0.8% y/y), 1.47mt (+3% y/y)
and 0.8mt (+23% y/y) for grey cement, white cement and wall care putty.
Valuation: maintain sell and PT of Rs1,020
We value Ultratech at a one-year forward EV/EBITDA of 6.5x. We are cautious on
the near-term outlook for the cement sector in India and maintain our Sell rating.
UltraTech Cement
UltraTech Cement (UltraTech) was formed when the former cement division of
L&T was demerged and bought by Grasim Industries of the Aditya Birla Group.
Recently, Grasim's demerged cement business (Samruddhi Cement) merged
with UltraTech, making UltraTech the largest cement company in India with a
capacity of about 49mt, and the eighth largest cement company globally. It has a
total capacity of about 52mt, including 3mt of overseas capacity (in Bangladesh,
Bahrain and UAE). UltraTech is also a leader in cement value-added products
such as white cement, wall-care putty and ready-mix concrete.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
UltraTech Cement
4 Q FY11: Good numbers
4Q FY11: Operating performance ahead of UBS-e
Ultratech reported net sales of Rs45.6bn (+139% y/y, +22% q/q; UBS-e Rs45.8
bn), operating profit of Rs10.9bn (+170% y/y, +48% q/q; UBS-e Rs10.7bn and
ahead of consensus estimate of Rs9.8bn). The reported PAT is Rs7.3bn (up 218%
y/y, +128% q/q). The numbers are ahead of estimates, mainly due to lower
depreciation & interest cost and a reversal of tax provision of Rs1.1bn. Domestic
cement and clinker volumes grew 11% q/q to 10.37mt (6% above UBS-e).
EBITDA margin in line with UBS-e despite rising input costs
The freight costs, raw material costs and power & fuel costs rose 12%, 22% and
45% y/y respectively. The company attributes the rise in fuel costs mainly to a
27% & 30% y/y increase in imported & domestic coal prices respectively.
However, the company managed to maintain its EBITDA margin at 23.9% (UBS-e
23.5%), due to higher realisations. Overall, Cement realisation improved 31% y/y
vs. 27% y/y rise in operating expenses.
Improvement in cement volumes
Domestic cement & clinker sales of grey cement was up 1.5% y/y to 32.76mt in
FY11, while white cement volumes grew by 3% to 4.14mt and wall care putty
volumes 28% to 2.3mt. Q4 volumes were 10.37mt (+0.8% y/y), 1.47mt (+3% y/y)
and 0.8mt (+23% y/y) for grey cement, white cement and wall care putty.
Valuation: maintain sell and PT of Rs1,020
We value Ultratech at a one-year forward EV/EBITDA of 6.5x. We are cautious on
the near-term outlook for the cement sector in India and maintain our Sell rating.
UltraTech Cement
UltraTech Cement (UltraTech) was formed when the former cement division of
L&T was demerged and bought by Grasim Industries of the Aditya Birla Group.
Recently, Grasim's demerged cement business (Samruddhi Cement) merged
with UltraTech, making UltraTech the largest cement company in India with a
capacity of about 49mt, and the eighth largest cement company globally. It has a
total capacity of about 52mt, including 3mt of overseas capacity (in Bangladesh,
Bahrain and UAE). UltraTech is also a leader in cement value-added products
such as white cement, wall-care putty and ready-mix concrete.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices.
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