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Result above estimates, earnings growth to moderate
Ultra Tech’s Q3FY12 result was above estimates primarily due to higher than
estimated domestic realization of Rs3,938/tonne vs. estimated Rs3,856/tonne.
Higher realization resulted in operating margins of 21.1% vs. estimated
19.8% and adjusted profit of Rs5.1bn vs. estimates of Rs4.6bn. Though higher
domestic realizations (up ~18% YoY, despite lower industry utilization rate)
helped the company to register robust earnings growth of 44% in 9MFY12
(which in our view led to outperformance of the stock in FY12 despite higher
valuations, sluggish demand and concerns on sustainability of higher prices),
going forward, we expect the earnings growth to moderate in FY13E. The
new pricing formula of Coal India, if implemented would result in EBITDA
margin contraction if the companies are not able to pass on the rise in coal
cost and we are awaiting clarity on the issue to factor in our assumptions. We
maintain Sell on UTCEM with target price of Rs945.
Higher realizations help to beat estimates and post better results: Higher
domestic realization (up 20.1% YoY) and sales volume (up 3.2% YoY) resulted
in 23.1% YoY growth in revenues to Rs45.7bn, 1.2% above our estimates of
Rs45.2bn. Higher realizations led to 36.3% YoY increase in EBITDA to Rs9.6bn
(est.: Rs8.9mn) and 21.1% in EBITDA margin, 1.3pp above our estimates of
19.8%. Adjusted profit (adjusted for subsidies related to earlier years) of the
company increased 60.5% YoY to Rs5.1bn, 12.1% above our estimates of
Rs4.6bn.
Increase in operating costs offset by steep increase in realization:
Operating costs increased 16.3% YoY led by an increase of 21% YoY in energy
costs, 17% YoY in raw material costs, 15% YoY in staff costs, 14.7% YoY in
other expenses and 11.8% YoY in freight costs. Despite higher operating costs,
EBITDA margin improved 2pp YoY to 21.1% primarily driven by steep 20.1%
YoY increase in domestic realization. Blended EBITDA/tonne improved 28%
YoY to Rs924 during the quarter.
Y/E March (Rsmn) Q3FY12 Q3FY11 % YoY Q2FY12 % QoQ
Net Sales 45,719 37,152 23.1 39,098 16.9
Expenses 36,069 30,074 19.9 33,281 8.4
EBITDA 9,649 7,078 36.3 5,816 65.9
EBITDA margin (%) 21.1 19.1 205bps 14.9 623bps
Reported PAT 6,169 3,190 93.4 2,789 121.2
Adjusted PAT 5,118 3,190 60.5 2,632 94.4
Source: Company, Centrum Research
Earnings growth to moderate going forward: Benefitting from higher
domestic realizations (up ~18% YoY despite lower industry utilization rate),
adjusted EPS of the company increased 44% YoY to Rs52.3 in 9MFY12. We
believe that outperformance of the stock over the past 1 year was driven by
stellar earnings growth despite concerns on the sustainability of pricing power
and sluggish volume growth. Going forward, we factor in a growth of 3% YoY
in earnings in Q4FY12E and 7% YoY in FY13E.
Increasing costs remain a challenge, maintain Sell on expensive
valuations: Operating costs (up 16% YoY in Q3FY12) continue to remain
higher and if the new pricing formula of Coal India is implemented, operating
margins could be under pressure going ahead. We are awaiting clarity on the
pricing formula adopted by the Coal India to factor in our assumptions. As of
now, we have factored in ~9% increase in coal costs in FY13E. The stock is
trading at 15.5x FY13E EPS, 8.6x EV/EBITDA and US$165.9 EV/tonne. We
maintain Sell on the stock with target price of Rs945, which gives a downside
of 22% from its CMP.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result above estimates, earnings growth to moderate
Ultra Tech’s Q3FY12 result was above estimates primarily due to higher than
estimated domestic realization of Rs3,938/tonne vs. estimated Rs3,856/tonne.
Higher realization resulted in operating margins of 21.1% vs. estimated
19.8% and adjusted profit of Rs5.1bn vs. estimates of Rs4.6bn. Though higher
domestic realizations (up ~18% YoY, despite lower industry utilization rate)
helped the company to register robust earnings growth of 44% in 9MFY12
(which in our view led to outperformance of the stock in FY12 despite higher
valuations, sluggish demand and concerns on sustainability of higher prices),
going forward, we expect the earnings growth to moderate in FY13E. The
new pricing formula of Coal India, if implemented would result in EBITDA
margin contraction if the companies are not able to pass on the rise in coal
cost and we are awaiting clarity on the issue to factor in our assumptions. We
maintain Sell on UTCEM with target price of Rs945.
Higher realizations help to beat estimates and post better results: Higher
domestic realization (up 20.1% YoY) and sales volume (up 3.2% YoY) resulted
in 23.1% YoY growth in revenues to Rs45.7bn, 1.2% above our estimates of
Rs45.2bn. Higher realizations led to 36.3% YoY increase in EBITDA to Rs9.6bn
(est.: Rs8.9mn) and 21.1% in EBITDA margin, 1.3pp above our estimates of
19.8%. Adjusted profit (adjusted for subsidies related to earlier years) of the
company increased 60.5% YoY to Rs5.1bn, 12.1% above our estimates of
Rs4.6bn.
Increase in operating costs offset by steep increase in realization:
Operating costs increased 16.3% YoY led by an increase of 21% YoY in energy
costs, 17% YoY in raw material costs, 15% YoY in staff costs, 14.7% YoY in
other expenses and 11.8% YoY in freight costs. Despite higher operating costs,
EBITDA margin improved 2pp YoY to 21.1% primarily driven by steep 20.1%
YoY increase in domestic realization. Blended EBITDA/tonne improved 28%
YoY to Rs924 during the quarter.
Y/E March (Rsmn) Q3FY12 Q3FY11 % YoY Q2FY12 % QoQ
Net Sales 45,719 37,152 23.1 39,098 16.9
Expenses 36,069 30,074 19.9 33,281 8.4
EBITDA 9,649 7,078 36.3 5,816 65.9
EBITDA margin (%) 21.1 19.1 205bps 14.9 623bps
Reported PAT 6,169 3,190 93.4 2,789 121.2
Adjusted PAT 5,118 3,190 60.5 2,632 94.4
Source: Company, Centrum Research
Earnings growth to moderate going forward: Benefitting from higher
domestic realizations (up ~18% YoY despite lower industry utilization rate),
adjusted EPS of the company increased 44% YoY to Rs52.3 in 9MFY12. We
believe that outperformance of the stock over the past 1 year was driven by
stellar earnings growth despite concerns on the sustainability of pricing power
and sluggish volume growth. Going forward, we factor in a growth of 3% YoY
in earnings in Q4FY12E and 7% YoY in FY13E.
Increasing costs remain a challenge, maintain Sell on expensive
valuations: Operating costs (up 16% YoY in Q3FY12) continue to remain
higher and if the new pricing formula of Coal India is implemented, operating
margins could be under pressure going ahead. We are awaiting clarity on the
pricing formula adopted by the Coal India to factor in our assumptions. As of
now, we have factored in ~9% increase in coal costs in FY13E. The stock is
trading at 15.5x FY13E EPS, 8.6x EV/EBITDA and US$165.9 EV/tonne. We
maintain Sell on the stock with target price of Rs945, which gives a downside
of 22% from its CMP.
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