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UBS Investment Research
UltraTech Cement
Q 2FY12 results: Below estimates
Event: Results below UBS and consensus estimates
Ultratech reported net sales of Rs39.8bn (+23% y/y, -10% q/q), operating profit of
Rs6.5bn (+49% y/y, -47% q/q; consensus Rs6.9bn) and PAT of Rs2.8bn (+141%
y/y, -59% q/q; below UBS-e of Rs3.2bn and consensus estimate of Rs3.7bn).
Q2FY12 EBITDA/t was about Rs710 per ton (street expectations of about Rs750).
Domestic cement and clinker volumes increased 2% YoY (-5% QoQ) to 8.94mt.
Impact: Realizations declined by about 6%, costs per ton up by about 10%
Net cement realisation decreased by about 5.6% QoQ, while total cost per ton
increased by about 10.5% QoQ. Staff costs increased by about 12% QoQ and other
expenditure increased by about 10% (14% YoY, likely led by maintenance works).
Power and fuel costs decreased by about 3% QoQ. Raw material costs per ton
increased by about 3.5% (about 40% including stock adjustments). Interest (-8%
QoQ, -21% YoY) and depreciation (flat QoQ, +2% YoY) were lower than our
expectations.
Action: Conference call on Oct 24th, Monday at 10am IST
We have a cautious view on the Indian Cement sector as we expect industry
overcapacity to persist for the next two to there years (and stocks are trading at
premiums to replacement costs). We expect to receive further details on the
management’s outlook and the performance of its overseas subsidiary, Star
Cement, in Grasim’s conference call on Monday, 24th October 2011 at 10am IST.
Valuation: Sell rating and PT of Rs950
We value Ultratech at a one-year forward EV/EBITDA of 6x.
UltraTech Cement
UltraTech Cement (UltraTech) was formed when the former cement division of
L&T was demerged and bought by Grasim Industries of the Aditya Birla Group.
Recently, Grasim's demerged cement business (Samruddhi Cement) merged
with UltraTech, making UltraTech the largest cement company in India with a
capacity of about 49mt, and the eighth largest cement company globally. It has a
total capacity of about 52mt, including 3mt of overseas capacity (in Bangladesh,
Bahrain and UAE). UltraTech is also a leader in cement value-added products
such as white cement, wall-care putty and ready-mix concrete.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
UltraTech Cement
Q 2FY12 results: Below estimates
Event: Results below UBS and consensus estimates
Ultratech reported net sales of Rs39.8bn (+23% y/y, -10% q/q), operating profit of
Rs6.5bn (+49% y/y, -47% q/q; consensus Rs6.9bn) and PAT of Rs2.8bn (+141%
y/y, -59% q/q; below UBS-e of Rs3.2bn and consensus estimate of Rs3.7bn).
Q2FY12 EBITDA/t was about Rs710 per ton (street expectations of about Rs750).
Domestic cement and clinker volumes increased 2% YoY (-5% QoQ) to 8.94mt.
Impact: Realizations declined by about 6%, costs per ton up by about 10%
Net cement realisation decreased by about 5.6% QoQ, while total cost per ton
increased by about 10.5% QoQ. Staff costs increased by about 12% QoQ and other
expenditure increased by about 10% (14% YoY, likely led by maintenance works).
Power and fuel costs decreased by about 3% QoQ. Raw material costs per ton
increased by about 3.5% (about 40% including stock adjustments). Interest (-8%
QoQ, -21% YoY) and depreciation (flat QoQ, +2% YoY) were lower than our
expectations.
Action: Conference call on Oct 24th, Monday at 10am IST
We have a cautious view on the Indian Cement sector as we expect industry
overcapacity to persist for the next two to there years (and stocks are trading at
premiums to replacement costs). We expect to receive further details on the
management’s outlook and the performance of its overseas subsidiary, Star
Cement, in Grasim’s conference call on Monday, 24th October 2011 at 10am IST.
Valuation: Sell rating and PT of Rs950
We value Ultratech at a one-year forward EV/EBITDA of 6x.
UltraTech Cement
UltraTech Cement (UltraTech) was formed when the former cement division of
L&T was demerged and bought by Grasim Industries of the Aditya Birla Group.
Recently, Grasim's demerged cement business (Samruddhi Cement) merged
with UltraTech, making UltraTech the largest cement company in India with a
capacity of about 49mt, and the eighth largest cement company globally. It has a
total capacity of about 52mt, including 3mt of overseas capacity (in Bangladesh,
Bahrain and UAE). UltraTech is also a leader in cement value-added products
such as white cement, wall-care putty and ready-mix concrete.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices
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