Ultratech Cement Q4 FY11: Higher realization and stable costs improved EBITDA sequentially:: Standard Chartered Research,

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Ultratech Cement
Q4 FY11: Higher realization and stable costs improved EBITDA sequentially


 Revenue increased 20.9% qoq on account of 10.8%
increase in volume and 9.1% increase in realization.
 Cost remained steady sequentially with power and fuel
cost declining marginally this quarter. This helped the
company post healthy EBITDA of Rs971/tonne.
 Because of the 30% increase in domestic coal prices,
cement companies are likely to experience an increase
in power and fuel costs in Q1 FY12.
 We maintain earning estimates and price target. Retain
IN-LINE.
Healthy sequential revenue growth. Cement dispatches
grew by 10.8% qoq to 10.5m tonnes. Realization also
increased by 9.1% qoq. The growth in both volume and
realization helped the company achieve revenue growth of
20.9% qoq. On a yoy basis revenue increased only 6.7%.
Steady costs on qoq basis. Operating cost per tonne
increased marginally from Rs3,170/tonne to Rs 3,300/tonne.
On account of steady coal prices, power and fuel costs
declined marginally from Rs945/tonne to Rs 919/tonne.
Higher realization coupled with steady costs resulted in
EBITDA increasing from Rs746/tonne in Q3 FY11 to
Rs971/tonne during Q4 FY11.
Costs increased on a yoy basis. On a yoy basis, variable
costs increased by approximately 14% primarily because of
the 27% increase in imported coal prices. Moreover, the
increase in fly ash and slag prices also contributed to the
increase in cost on yoy terms.
Power and fuel costs likely to rise during Q1 FY12.
Domestic coal prices have increased by approximately 30%
in Mar ’11. This is likely to increase power and fuel costs of
all cement companies during Q1 FY12.
Valuation: Maintain IN-LINE. We maintain our price target
and IN-LINE rating. We have also not revised our earnings
estimates.
Risks – Major upside risk is better-than-expected volume
growth. Increased cost and weaker-than-expected
realization are the main downside risks.