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4QFY11 results
UltraTech’s Ebitda (adjusted for Samruddhi merger) rose 2% YoY to
Rs10.2bn in-line with our estimates; higher other income and lower tax
rates helped pre-ex earnings which rose 13% YoY to Rs6.1bn, marginally
better than our estimates (much higher than consensus estimate of
Rs4.9bn, though). Higher cement prices driven by producer discipline led
to a sharp sequential rise in Ebitda margins to Rs970/t. We however
remain cautious on the sector fundamentals and expect margin pressures
to continue in the medium term. Valuations at 10x EV/Ebitda are
expensive in this context; maintain Upf.
4Q Ebitda in-line, net earnings ahead of estimates
UltraTech’s 4Q Ebitda (adjusted for Samruddhi merger in the base quarter) at
Rs10.2bn was up 2% YoY, in-line with our estimates. While realisations
(Rs183/bag; +11% QoQ) were better, volumes (10.9mt; -3% YoY) were
marginally lower and costs were also higher. Ebitda margins rose 30% QoQ to
Rs940/t. Higher other income (+65% YoY) and lower tax rates (25.5% cf.
31% in 9mFY11) helped as UltraTech’s net earnings grew 13% YoY to
Rs6.1bn, marginally ahead of our estimates.
Pricing discipline led to sharp rise in realisations
Despite weak industry demand-supply balance, UltraTech’s cement
realisations rose 11% QoQ, thanks to producer discipline across regions. We
however expect pricing discipline to weaken in the coming months due to
slowdown in construction activity with the onset of monsoon; rising capacity
surpluses would also impact. We therefore model in a 5% decline in FY12
realisations from 4QFY11 levels and expect pricing pressures to continue in
the medium term.
Cost pressures would be another margin headwind
UltraTech’s unit production costs rose 9% QoQ. While unit production costs
(materials plus energy) rose 7% QoQ, freight costs are up 6%; other
expenses too rose sharply (+22% QoQ). We however note that 4Q does not
capture the full impact of 30% hike in domestic linkage coal price (~35%
mix) with effect from Mar-11 which should be visible from 1QFY12 onwards.
Rising costs along with limited pricing power would keep earnings under
pressure as we expect FY12-13 Ebitda/t to stay at FY11 levels of Rs725/t.
Maintain earning estimates; retain Upf
We remain concerned on the sector fundamentals and expect margin
pressures to continue. Current valuations at 9x FY12 EV/Ebitda, 17x PE are
rich in this context; 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 �� ��
4QFY11 results
UltraTech’s Ebitda (adjusted for Samruddhi merger) rose 2% YoY to
Rs10.2bn in-line with our estimates; higher other income and lower tax
rates helped pre-ex earnings which rose 13% YoY to Rs6.1bn, marginally
better than our estimates (much higher than consensus estimate of
Rs4.9bn, though). Higher cement prices driven by producer discipline led
to a sharp sequential rise in Ebitda margins to Rs970/t. We however
remain cautious on the sector fundamentals and expect margin pressures
to continue in the medium term. Valuations at 10x EV/Ebitda are
expensive in this context; maintain Upf.
4Q Ebitda in-line, net earnings ahead of estimates
UltraTech’s 4Q Ebitda (adjusted for Samruddhi merger in the base quarter) at
Rs10.2bn was up 2% YoY, in-line with our estimates. While realisations
(Rs183/bag; +11% QoQ) were better, volumes (10.9mt; -3% YoY) were
marginally lower and costs were also higher. Ebitda margins rose 30% QoQ to
Rs940/t. Higher other income (+65% YoY) and lower tax rates (25.5% cf.
31% in 9mFY11) helped as UltraTech’s net earnings grew 13% YoY to
Rs6.1bn, marginally ahead of our estimates.
Pricing discipline led to sharp rise in realisations
Despite weak industry demand-supply balance, UltraTech’s cement
realisations rose 11% QoQ, thanks to producer discipline across regions. We
however expect pricing discipline to weaken in the coming months due to
slowdown in construction activity with the onset of monsoon; rising capacity
surpluses would also impact. We therefore model in a 5% decline in FY12
realisations from 4QFY11 levels and expect pricing pressures to continue in
the medium term.
Cost pressures would be another margin headwind
UltraTech’s unit production costs rose 9% QoQ. While unit production costs
(materials plus energy) rose 7% QoQ, freight costs are up 6%; other
expenses too rose sharply (+22% QoQ). We however note that 4Q does not
capture the full impact of 30% hike in domestic linkage coal price (~35%
mix) with effect from Mar-11 which should be visible from 1QFY12 onwards.
Rising costs along with limited pricing power would keep earnings under
pressure as we expect FY12-13 Ebitda/t to stay at FY11 levels of Rs725/t.
Maintain earning estimates; retain Upf
We remain concerned on the sector fundamentals and expect margin
pressures to continue. Current valuations at 9x FY12 EV/Ebitda, 17x PE are
rich in this context; maintain Upf rating on the stock (target: Rs975/sh).
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