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M u t e d v o l u m e s , w e a k r e a l i s a t i o n s …
UltraTech Cement reported net sales of | 3910 crore (up 22% YoY, down
10% QoQ) and net profit of | 279 crore, which were lower than our
respective estimates of | 4128 crore and | 414 crore on account of lower
than expected blended volume & blended realisations. Cement volumes
and realisations remained muted during the quarter on the back of weak
demand led by issues like rise in cost of capital and onset of the monsoon
season. EBITDA/tonne came at | 643/tonne (our estimate: | 861/tonne) as
the increase in costs impacted margins. Going forward, we expect
margins to remain under pressure on account of increasing input costs
like power & fuel and freight.
ƒ Net realisation up ~24% YoY, volume down ~2% YoY (~8% QoQ)
Blended sales volumes declined ~2% YoY (~8% QoQ) to 9.04 MT
on account of weak demand during the quarter due to slowdown in
construction activities led by issues like rise in cost of capital and
onset of the monsoon season. The demand slowdown also led to a
fall in cement prices during the quarter. Blended realisation declined
~2% QoQ to | 4325/tonne while it increased ~24% YoY.
ƒ EBITDA declines ~47% QoQ to | 643/tonne on higher costs
Sequentially, the EBITDA declined ~47% to | 643/tonne on account
of ~2% decline in realisation and ~14% increase in costs, mainly
led by an increase in raw material cost, employee and other costs.
However, the EBITDA increased ~45% YoY on higher realisation.
V a l u a t i o n
At the CMP of | 1119, the stock is trading at 16.9x and 15.5x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 9.1x
and 8.2x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $134 and $144 its FY12E and FY13E capacities,
respectively. We are maintaining our HOLD rating on the stock with a
revised target price of | 1169/share. We have valued the FY13E installed
capacity of ~52 MT at $140/tonne, which is in line with the current
replacement cost.
Net sales decline sequentially on lower volumes and lower realisation
Net sales increased ~22% YoY to | 3909.8 crore as the net blended
realisation (accounting for grey and white cement including clinker sales)
increased ~24% YoY to | 4325/tonne. However, the blended sales
volume (grey & white cement with clinker) has declined ~2% YoY to 9.04
MT. On a sequential basis, net sales declined ~10% as the blended
realisation declined ~2% and blended volume declined ~8%.
Cement demand remained sluggish during the quarter on account of a
slowdown in construction activities due to certain issues like rise in cost
of capital and onset of the monsoon season. The demand slowdown also
led to a fall in cement prices during the quarter.
Sequential decline in operating margin on lower realisation, higher costs
The power & fuel cost has increased ~15% YoY (flat QoQ) to |
1056/tonne on account of an increase in domestic coal prices. Coal India
hiked coal prices in February 2011 by ~30-150% depending on the
grades of coal (Grade A-F). UltraTech consumes a mix of domestic and
imported coal of which domestic coal accounts for ~50% of the total
requirement (~30% through linkage and ~20% through e-auction/open
market).
The raw material cost (adjusted after increase/decrease in stock) has
increased ~43% YoY (~46% QoQ) to | 688/tonne on account of the
increase in prices of raw materials like gypsum, slag and fly ash. The
freight cost has increased ~17% YoY (~6% QoQ) to | 827/tonne on the
back of an increase in diesel prices and railway fright rates. The employee
cost has increased ~10% YoY (~22% QoQ) to | 228/tonne. The other
expenditure has increased ~19% YoY (~21% QoQ) to | 882/tonne due to
increase in repair and maintenance expenses.
Hence, the total cost increased ~20% YoY (~14% QoQ) to | 3682/tonne.
Thus, on account of the higher costs and lower realisation, the EBITDA
declined by ~47% QoQ to | 643/tonne. However, the EBITDA/tonne
remained higher by ~45% on a YoY basis as Q2FY11 margins were
depressed due to a sharp fall in realisation.
Net profit declines ~59% QoQ on significant decline in margins
On a YoY basis, the company has reported a ~141% increase in net profit
to | 278.9 crore in Q2FY12 on the back of ~24% higher realisation, ~20%
decline in interest cost and ~51% increase in other income. On a
sequential basis, net profit declined ~59% on account of a significant
decline in operating margin led by higher costs and lower realisation.
Capex plan
The company has a capital outlay of | 11,000 crore for the next three
years. This includes setting up of additional integrated cement plants at
Chhattisgarh and Karnataka with capacities of 4.8 MT and 4.4 MT,
respectively, 75 MW thermal captive power plants and 45 MW waste heat
recovery plant. The capex also includes packaging terminals and ready
mix concrete across various states. The expansion units are expected to
come on stream by Q2FY14E. After this expansion of 9.2 MTPA, the
company will have an installed capacity of ~61 MTPA by FY14E.
After the merger with Samruddhi Cement, UltraTech became the largest
cement manufacturer with installed capacity of 48.9 MTPA. Moreover,
after the acquisition of UAE based Star Cement, its installed capacity has
reached 51.9 MTPA.
Valuations
At the CMP of | 1119, the stock is trading at 16.9x and 15.5x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 9.1x
and 8.2x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $134 and $144 its FY12E and FY13E capacities,
respectively. We are maintaining our HOLD rating on the stock with a
revised target price of | 1169/share. We have valued the FY13E installed
capacity of ~52 MT at $140/tonne, which is in line with the current
replacement cost.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M u t e d v o l u m e s , w e a k r e a l i s a t i o n s …
UltraTech Cement reported net sales of | 3910 crore (up 22% YoY, down
10% QoQ) and net profit of | 279 crore, which were lower than our
respective estimates of | 4128 crore and | 414 crore on account of lower
than expected blended volume & blended realisations. Cement volumes
and realisations remained muted during the quarter on the back of weak
demand led by issues like rise in cost of capital and onset of the monsoon
season. EBITDA/tonne came at | 643/tonne (our estimate: | 861/tonne) as
the increase in costs impacted margins. Going forward, we expect
margins to remain under pressure on account of increasing input costs
like power & fuel and freight.
ƒ Net realisation up ~24% YoY, volume down ~2% YoY (~8% QoQ)
Blended sales volumes declined ~2% YoY (~8% QoQ) to 9.04 MT
on account of weak demand during the quarter due to slowdown in
construction activities led by issues like rise in cost of capital and
onset of the monsoon season. The demand slowdown also led to a
fall in cement prices during the quarter. Blended realisation declined
~2% QoQ to | 4325/tonne while it increased ~24% YoY.
ƒ EBITDA declines ~47% QoQ to | 643/tonne on higher costs
Sequentially, the EBITDA declined ~47% to | 643/tonne on account
of ~2% decline in realisation and ~14% increase in costs, mainly
led by an increase in raw material cost, employee and other costs.
However, the EBITDA increased ~45% YoY on higher realisation.
V a l u a t i o n
At the CMP of | 1119, the stock is trading at 16.9x and 15.5x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 9.1x
and 8.2x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $134 and $144 its FY12E and FY13E capacities,
respectively. We are maintaining our HOLD rating on the stock with a
revised target price of | 1169/share. We have valued the FY13E installed
capacity of ~52 MT at $140/tonne, which is in line with the current
replacement cost.
Net sales decline sequentially on lower volumes and lower realisation
Net sales increased ~22% YoY to | 3909.8 crore as the net blended
realisation (accounting for grey and white cement including clinker sales)
increased ~24% YoY to | 4325/tonne. However, the blended sales
volume (grey & white cement with clinker) has declined ~2% YoY to 9.04
MT. On a sequential basis, net sales declined ~10% as the blended
realisation declined ~2% and blended volume declined ~8%.
Cement demand remained sluggish during the quarter on account of a
slowdown in construction activities due to certain issues like rise in cost
of capital and onset of the monsoon season. The demand slowdown also
led to a fall in cement prices during the quarter.
Sequential decline in operating margin on lower realisation, higher costs
The power & fuel cost has increased ~15% YoY (flat QoQ) to |
1056/tonne on account of an increase in domestic coal prices. Coal India
hiked coal prices in February 2011 by ~30-150% depending on the
grades of coal (Grade A-F). UltraTech consumes a mix of domestic and
imported coal of which domestic coal accounts for ~50% of the total
requirement (~30% through linkage and ~20% through e-auction/open
market).
The raw material cost (adjusted after increase/decrease in stock) has
increased ~43% YoY (~46% QoQ) to | 688/tonne on account of the
increase in prices of raw materials like gypsum, slag and fly ash. The
freight cost has increased ~17% YoY (~6% QoQ) to | 827/tonne on the
back of an increase in diesel prices and railway fright rates. The employee
cost has increased ~10% YoY (~22% QoQ) to | 228/tonne. The other
expenditure has increased ~19% YoY (~21% QoQ) to | 882/tonne due to
increase in repair and maintenance expenses.
Hence, the total cost increased ~20% YoY (~14% QoQ) to | 3682/tonne.
Thus, on account of the higher costs and lower realisation, the EBITDA
declined by ~47% QoQ to | 643/tonne. However, the EBITDA/tonne
remained higher by ~45% on a YoY basis as Q2FY11 margins were
depressed due to a sharp fall in realisation.
Net profit declines ~59% QoQ on significant decline in margins
On a YoY basis, the company has reported a ~141% increase in net profit
to | 278.9 crore in Q2FY12 on the back of ~24% higher realisation, ~20%
decline in interest cost and ~51% increase in other income. On a
sequential basis, net profit declined ~59% on account of a significant
decline in operating margin led by higher costs and lower realisation.
Capex plan
The company has a capital outlay of | 11,000 crore for the next three
years. This includes setting up of additional integrated cement plants at
Chhattisgarh and Karnataka with capacities of 4.8 MT and 4.4 MT,
respectively, 75 MW thermal captive power plants and 45 MW waste heat
recovery plant. The capex also includes packaging terminals and ready
mix concrete across various states. The expansion units are expected to
come on stream by Q2FY14E. After this expansion of 9.2 MTPA, the
company will have an installed capacity of ~61 MTPA by FY14E.
After the merger with Samruddhi Cement, UltraTech became the largest
cement manufacturer with installed capacity of 48.9 MTPA. Moreover,
after the acquisition of UAE based Star Cement, its installed capacity has
reached 51.9 MTPA.
Valuations
At the CMP of | 1119, the stock is trading at 16.9x and 15.5x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 9.1x
and 8.2x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $134 and $144 its FY12E and FY13E capacities,
respectively. We are maintaining our HOLD rating on the stock with a
revised target price of | 1169/share. We have valued the FY13E installed
capacity of ~52 MT at $140/tonne, which is in line with the current
replacement cost.
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