Ultratech Cement Ltd. - Realizations surprise positively REDUCE: Emkay

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Ultratech Cement Ltd.

Realizations surprise positively

REDUCE

CMP: Rs1,028                                       Target Price: Rs1,050

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n     APAT at Rs6.83 bn – above estimates due to higher cement realizations & lower employee & other expenses. Higher exit prices of FY11 sustained in April & push quarter average realizations to Rs4427/t higher that estimates of Rs4283/t

n     Better prices & lower costs drive EBITDA/t to Rs1205 highest in last 8 quarters (+27% qoq) helping EBITDA growth of 16% qoq. Though effect of coal price hike visible (P&F/t +17.6% qoq), we believe it is yet to reflect fully

n     Sluggish cement demand (-0.5% ytd) starts impacting cement prices- down ~Rs20/bag from Aprill-11 peaks. New mining tax could be another blow- could increase limestone & coal cost

n     Stock trades at PER of 14.5X & EV/ton of USD125 on FY12E-  Valuation still not in comfort zone, considering prices & cost headwind making current profitability unsustainable-REDUCE