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No surprise in the weak number: UTCEM reported weak 2QFY12
standalone results with EBITDA of Rs6.5bn vs. JPMe Rs6.8bn and
consensus at Rs6.7bn. EBITDA/MT was down 42% q/q to Rs705/MT
(JPMe Rs746/MT) due to higher costs and lower ASPs. 2QFY12 PAT
came in at Rs2.8bn, inline with our estimates of Rs2.9bn but below
consensus at Rs3.5bn. Interest expense was lower due to an interest
subsidy in the quarter, while other income increased 22% q/q due to
write back of excess provisions.
South exposure hurts volumes but supports ASPs: Y/Y performance
was very strong given the prior year quarter was impacted by intense
price competition in key markets. 2QFY12 volumes continued to lag
industry growth (UTCEM 2Q sales declined 8% q/q vs -6% for the large
4 player) given the lack of demand recovery in South India region.
However, UTCEM’s exposure to South India helped limit realization
decline (down 2% q/q vs. JPMe at -6%) in a weak pricing season in
other markets. Prices in South were fairly stable as compared to the 15-
20% decline in price seen in North and Western India markets in July-
Aug.
Cost pressures remain: While much of the increase in cost/MT (up
14% q/q) was due to higher employee cost/MT (+21%) and other
costs/Mt (+19% q/q), we believe costs are likely to remain elevated in
the near term. Higher coal, freight and raw material costs remain key
item seeing increasing trend over the last year.
Benign base to help near term growth: The company expects the
surplus scenario to continue over the next 2-3 years. However, in its
presentation, parent Grasim has highlighted that medium to long term
demand growth of cement will be in the 8-9% level. In our view, growth
in 2HFY12 would be higher than the 1H given the benign base and some
pick up in road projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
No surprise in the weak number: UTCEM reported weak 2QFY12
standalone results with EBITDA of Rs6.5bn vs. JPMe Rs6.8bn and
consensus at Rs6.7bn. EBITDA/MT was down 42% q/q to Rs705/MT
(JPMe Rs746/MT) due to higher costs and lower ASPs. 2QFY12 PAT
came in at Rs2.8bn, inline with our estimates of Rs2.9bn but below
consensus at Rs3.5bn. Interest expense was lower due to an interest
subsidy in the quarter, while other income increased 22% q/q due to
write back of excess provisions.
South exposure hurts volumes but supports ASPs: Y/Y performance
was very strong given the prior year quarter was impacted by intense
price competition in key markets. 2QFY12 volumes continued to lag
industry growth (UTCEM 2Q sales declined 8% q/q vs -6% for the large
4 player) given the lack of demand recovery in South India region.
However, UTCEM’s exposure to South India helped limit realization
decline (down 2% q/q vs. JPMe at -6%) in a weak pricing season in
other markets. Prices in South were fairly stable as compared to the 15-
20% decline in price seen in North and Western India markets in July-
Aug.
Cost pressures remain: While much of the increase in cost/MT (up
14% q/q) was due to higher employee cost/MT (+21%) and other
costs/Mt (+19% q/q), we believe costs are likely to remain elevated in
the near term. Higher coal, freight and raw material costs remain key
item seeing increasing trend over the last year.
Benign base to help near term growth: The company expects the
surplus scenario to continue over the next 2-3 years. However, in its
presentation, parent Grasim has highlighted that medium to long term
demand growth of cement will be in the 8-9% level. In our view, growth
in 2HFY12 would be higher than the 1H given the benign base and some
pick up in road projects.
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