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Sharp price hikes and lower non-trade volumes boost blended realisation
UltraTech Cements’ (UTCL) Q4FY11 blended realisation jumped 11.8% Q-o-Q to
INR 4,200/tonne on back of sharp price hikes across regions and lower volumes
in the non-trade segment. Total volumes for the quarter, at 10.85 mt, rose 9%
Q-o-Q, but dipped 2% Y-o-Y (comparable for the merged entity). The volume
break up for the quarter is—10.37 mt of domestic cement and clinker sales, 0.33
mt of clinker exports, and 0.15 mt of white cement. Total revenue, at INR 45.6
bn (including INR 2.7 bn revenue of white cement division), surged 22% Q-o-Q.
Cost/tonne up 6% Q-o-Q; blended EBITDA/tonne jumps 36% Q-o-Q
The overall cost per tonne, at INR 3,198, was higher 5.9% Q-o-Q with major
increase in the cost of raw material (up 13% Q-o-Q per tonne) and other
expenditure (up 12% Q-o-Q per tonne). However, power and fuel cost, at INR
890/tonne, was flat Q-o-Q. With 30% increase in the cost of domestic coal and
imported coal prices rising an average 16% Q-o-Q, we expect the cost to be INR
1,040/tonne for FY12E, up 17% from Q4FY11. The blended EBITDA/tonne was
impressive at INR 1,002, up 36% Q-o-Q.
Reversal of tax provision leads to higher PAT
The effective tax rate for the quarter was just 11% due to INR 1,151 mn
reversal in the tax provision related to earlier years. As a result, reported PAT of
INR 7.3 bn was higher than our as well as the street’s expectations.
Capex outlay at INR 110 bn
UTCL has a capital outlay of around INR 110 bn to be spent over the next three
years to enhance its cement capacity by 9.2 mtpa, which is expected to be
operational by early FY14.
Outlook and valuations: Production discipline to stay; maintain ‘BUY’
With visible benefits of production discipline in Q4FY11, we expect companies to
be rational and estimate firm pricing environment over the next two years. The
stock currently trades at attractive valuations of 7.1x FY13E EV/EBITDA. We
maintain our ‘BUY’ recommendation on the stock with ‘Sector Outperformer’
rating. We value the stock at 8x FY13E EV/EBITDA (lower than the 10 year
average EV/EBITDA of 8.5x for ACC, due to slightly lower ROEs), which leads to
a price target of INR 1,230 per share, representing 16.1% upside potential.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sharp price hikes and lower non-trade volumes boost blended realisation
UltraTech Cements’ (UTCL) Q4FY11 blended realisation jumped 11.8% Q-o-Q to
INR 4,200/tonne on back of sharp price hikes across regions and lower volumes
in the non-trade segment. Total volumes for the quarter, at 10.85 mt, rose 9%
Q-o-Q, but dipped 2% Y-o-Y (comparable for the merged entity). The volume
break up for the quarter is—10.37 mt of domestic cement and clinker sales, 0.33
mt of clinker exports, and 0.15 mt of white cement. Total revenue, at INR 45.6
bn (including INR 2.7 bn revenue of white cement division), surged 22% Q-o-Q.
Cost/tonne up 6% Q-o-Q; blended EBITDA/tonne jumps 36% Q-o-Q
The overall cost per tonne, at INR 3,198, was higher 5.9% Q-o-Q with major
increase in the cost of raw material (up 13% Q-o-Q per tonne) and other
expenditure (up 12% Q-o-Q per tonne). However, power and fuel cost, at INR
890/tonne, was flat Q-o-Q. With 30% increase in the cost of domestic coal and
imported coal prices rising an average 16% Q-o-Q, we expect the cost to be INR
1,040/tonne for FY12E, up 17% from Q4FY11. The blended EBITDA/tonne was
impressive at INR 1,002, up 36% Q-o-Q.
Reversal of tax provision leads to higher PAT
The effective tax rate for the quarter was just 11% due to INR 1,151 mn
reversal in the tax provision related to earlier years. As a result, reported PAT of
INR 7.3 bn was higher than our as well as the street’s expectations.
Capex outlay at INR 110 bn
UTCL has a capital outlay of around INR 110 bn to be spent over the next three
years to enhance its cement capacity by 9.2 mtpa, which is expected to be
operational by early FY14.
Outlook and valuations: Production discipline to stay; maintain ‘BUY’
With visible benefits of production discipline in Q4FY11, we expect companies to
be rational and estimate firm pricing environment over the next two years. The
stock currently trades at attractive valuations of 7.1x FY13E EV/EBITDA. We
maintain our ‘BUY’ recommendation on the stock with ‘Sector Outperformer’
rating. We value the stock at 8x FY13E EV/EBITDA (lower than the 10 year
average EV/EBITDA of 8.5x for ACC, due to slightly lower ROEs), which leads to
a price target of INR 1,230 per share, representing 16.1% upside potential.
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