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1QFY12 results
UltraTech’s Ebitda (adjusted for Samruddhi merger) rose 19% YoY to
Rs11.9bn, better than our estimates; lower tax rates further helped and
net earnings rose 25% to Rs6.1bn, 16% ahead of estimates. Higher
cement prices driven by producer discipline and lower overheads drove a
sharp sequential rise in Ebitda margins to Rs1,180/t. The recent
corrections in prices would however impact margins from 2Q and
pressures would continue in the medium term. We remain cautious on the
sector; valuations at 9.5x EV/Ebitda are expensive in this context; Upf.
1Q results ahead of our estimates
UltraTech’s 1Q Ebitda (adjusted for Samruddhi merger in the base quarter) at
Rs11.9bn was up 19% YoY, 13% ahead of our estimates. While realisations
(Rs195/bag; +6% QoQ) were slightly higher, volumes (10mt; -3% YoY) were
in-line; unit costs (-1% QoQ) were however much lower than estimates.
Ebitda margins rose 26% QoQ to Rs1,180/t. Other income, interest were
broadly in-line while tax rates were lower at 28.7% on the back of which,
adjusted net earnings grew 25% YoY to Rs6.8bn, 16% ahead of estimates.
Pricing discipline helped, recent corrections to impact realisations
Despite weak industry demand-supply balance, UltraTech’s realisations rose
6% QoQ, thanks to producer discipline (mainly in south/west, in our view).
We however note that prices corrected 3-20% across regions in the last few
weeks due to slowdown in construction activity with the onset of monsoon;
rising capacity surpluses would also continue to impact. We therefore model
in a 9% decline in UltraTech’s realisations over the next three quarters from
1Q levels and expect pressures to continue in the medium term.
Margins would come down in the next three quarters
UltraTech’s unit production costs rose 9% YoY (declined 1% QoQ, though).
The quarter also captures the impact of rise in linkage coal prices (~30%
linkage mix) as power & fuel costs rose ~8% QoQ. With costs likely to stay
firm and lower realisations, we expect Ebitda margins to stay weak in the
next three quarters at Rs650-700/t levels. Management too has expressed
concerns on surplus scenario and expects this to continue for the next 2-3
years which would keep margins under pressure
Raising estimates by 2-5%; maintain Upf (target: Rs975/sh; -3%)
We raise our earning estimates by 2-5% to factor in higher 1Q. We however
remain concerned on the sector fundamentals and expect margin pressures to
continue in the medium term. Valuations at 9.5x 1-year forward EV/Ebitda,
16x PE are rich in this context; maintain Upf (target: Rs975/sh).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12 results
UltraTech’s Ebitda (adjusted for Samruddhi merger) rose 19% YoY to
Rs11.9bn, better than our estimates; lower tax rates further helped and
net earnings rose 25% to Rs6.1bn, 16% ahead of estimates. Higher
cement prices driven by producer discipline and lower overheads drove a
sharp sequential rise in Ebitda margins to Rs1,180/t. The recent
corrections in prices would however impact margins from 2Q and
pressures would continue in the medium term. We remain cautious on the
sector; valuations at 9.5x EV/Ebitda are expensive in this context; Upf.
1Q results ahead of our estimates
UltraTech’s 1Q Ebitda (adjusted for Samruddhi merger in the base quarter) at
Rs11.9bn was up 19% YoY, 13% ahead of our estimates. While realisations
(Rs195/bag; +6% QoQ) were slightly higher, volumes (10mt; -3% YoY) were
in-line; unit costs (-1% QoQ) were however much lower than estimates.
Ebitda margins rose 26% QoQ to Rs1,180/t. Other income, interest were
broadly in-line while tax rates were lower at 28.7% on the back of which,
adjusted net earnings grew 25% YoY to Rs6.8bn, 16% ahead of estimates.
Pricing discipline helped, recent corrections to impact realisations
Despite weak industry demand-supply balance, UltraTech’s realisations rose
6% QoQ, thanks to producer discipline (mainly in south/west, in our view).
We however note that prices corrected 3-20% across regions in the last few
weeks due to slowdown in construction activity with the onset of monsoon;
rising capacity surpluses would also continue to impact. We therefore model
in a 9% decline in UltraTech’s realisations over the next three quarters from
1Q levels and expect pressures to continue in the medium term.
Margins would come down in the next three quarters
UltraTech’s unit production costs rose 9% YoY (declined 1% QoQ, though).
The quarter also captures the impact of rise in linkage coal prices (~30%
linkage mix) as power & fuel costs rose ~8% QoQ. With costs likely to stay
firm and lower realisations, we expect Ebitda margins to stay weak in the
next three quarters at Rs650-700/t levels. Management too has expressed
concerns on surplus scenario and expects this to continue for the next 2-3
years which would keep margins under pressure
Raising estimates by 2-5%; maintain Upf (target: Rs975/sh; -3%)
We raise our earning estimates by 2-5% to factor in higher 1Q. We however
remain concerned on the sector fundamentals and expect margin pressures to
continue in the medium term. Valuations at 9.5x 1-year forward EV/Ebitda,
16x PE are rich in this context; maintain Upf (target: Rs975/sh).
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