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Results above estimates; challenges
remain
UltraTech Cement’s Q4FY11 results were above our estimates
with EBITDA at Rs10.21bn (12.7% above our estimate of
Rs9.06bn) and adjusted PAT at Rs6.12bn (36.1% above our
estimate of Rs 4.49 bn). EBITDA margin at 22.7% was 134bps
above our estimate of 21.4%. The company faces headwinds
ahead with increasing energy, freight and raw material costs.
We believe current valuations at 8.8x FY13E EV/EBITDA and
FY13E EV/tonne of US$158 are expensive. We maintain our
Sell rating with a target price of Rs787.
Q4 results above estimates: The company reported Q4 net
sales of Rs44.9bn, 6.1% above our estimate of Rs42.34bn
mainly due higher-than-expected domestic cement
realization of Rs3,650/tonne (our estimate: Rs 3,508). EBITDA
at Rs10.21bn was 12.7% above our estimate driven by betterthan-
estimated realizations. Adjusted PAT (adjusted for tax
reversal of Rs11.51bn) at Rs6.12bn was 36.1% higher than our
estimates of Rs4.49 bn.
Earnings estimates raised: We have raised our EPS estimates
by 12.4% to Rs59 from Rs52.5 earlier for FY12E and 9.8% to
Rs64.3 from Rs58.6 for FY13E to factor in the better
realizations during the quarter. We have revised our domestic
realization assumptions upwards by 2.3% to Rs 3,602/tonne
for FY12E and 2% to 3,747/tonne for FY13E.
Stock looks vulnerable at current valuations: The stock is
trading at 16.5x FY13E EPS, 8.8x FY13E EV/EBITDA and US$158
FY13E EV/Tonne. This valuation is a steep premium to the
replacement cost and its mean historical EV/tonne of
US$108.5 considering the volatility in cement prices due to
widening demand-supply mismatch, risks attached to
despatches growth and expected decline in RoE from an
average of 39.7% between FY07-10 to 13.8% over FY10-
FY13E. We maintain Sell with a target price of Rs787, a
downside of 25.6% from the CMP.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Results above estimates; challenges
remain
UltraTech Cement’s Q4FY11 results were above our estimates
with EBITDA at Rs10.21bn (12.7% above our estimate of
Rs9.06bn) and adjusted PAT at Rs6.12bn (36.1% above our
estimate of Rs 4.49 bn). EBITDA margin at 22.7% was 134bps
above our estimate of 21.4%. The company faces headwinds
ahead with increasing energy, freight and raw material costs.
We believe current valuations at 8.8x FY13E EV/EBITDA and
FY13E EV/tonne of US$158 are expensive. We maintain our
Sell rating with a target price of Rs787.
Q4 results above estimates: The company reported Q4 net
sales of Rs44.9bn, 6.1% above our estimate of Rs42.34bn
mainly due higher-than-expected domestic cement
realization of Rs3,650/tonne (our estimate: Rs 3,508). EBITDA
at Rs10.21bn was 12.7% above our estimate driven by betterthan-
estimated realizations. Adjusted PAT (adjusted for tax
reversal of Rs11.51bn) at Rs6.12bn was 36.1% higher than our
estimates of Rs4.49 bn.
Earnings estimates raised: We have raised our EPS estimates
by 12.4% to Rs59 from Rs52.5 earlier for FY12E and 9.8% to
Rs64.3 from Rs58.6 for FY13E to factor in the better
realizations during the quarter. We have revised our domestic
realization assumptions upwards by 2.3% to Rs 3,602/tonne
for FY12E and 2% to 3,747/tonne for FY13E.
Stock looks vulnerable at current valuations: The stock is
trading at 16.5x FY13E EPS, 8.8x FY13E EV/EBITDA and US$158
FY13E EV/Tonne. This valuation is a steep premium to the
replacement cost and its mean historical EV/tonne of
US$108.5 considering the volatility in cement prices due to
widening demand-supply mismatch, risks attached to
despatches growth and expected decline in RoE from an
average of 39.7% between FY07-10 to 13.8% over FY10-
FY13E. We maintain Sell with a target price of Rs787, a
downside of 25.6% from the CMP.
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