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UltraTech Cement reported Q3 earnings above estimates due to one‐off
items like INR666mn subsidies related to earlier years and INR384mn in
interest subsidy. The adjusted EB/t of INR953 was below our assumption
of INR1,003/t. Cement sales volume increased 4.6% YoY but the YTD
growth remains muted at ~2% YOY. Adjusted blended realization surged
5.5% QoQ, but was offset by 7.3% increase in cost of fuel and 4.7% hike in
freight costs. With the current surge in prices being unsustainable in FY13
due to low industry capacity utilisation of 75%, we maintain ‘HOLD.’
PAT above estimates due to one‐offs
Reported PAT for the quarter at INR6.2bn was above our estimates of INR5.6bn due to
INR666mn of other operating income, related to subsidies at the Rajasthan plant for
earlier years and INR384mn in interest rate subsidy. Going ahead, ~INR160mn‐170mn
of interest subsidy is likely to continue every quarter for ~3 years.
Operating performance below estimates
Adjusted to one‐off items, the EBITDA/tonne for the quarter stood at INR953 (vs our
estimate of INR1,003). Though the adjusted blended realization surged 5.5% QoQ to
INR 4,468/t, the gain was offset by 7.3% QoQ increase in the cost of power and fuel per
tonne and 4.7% QoQ hike in the freight cost per tonne. Grey cement sales volume for
the quarter inched up by 4.6% YoY though the YTD growth remains muted at 2% YoY.
(Refer table 1 for volume break up).
Outlook and valuations: Sector concerns remain; maintain ‘HOLD’
Due to the busy season, cement prices are likely to firm up in the near term, but
we see the same as unsustainable in FY13 due to low industry capacity utilization
of 75%. Due to the high other operating income and low interest cost, our earnings
for FY12 are being revised upwards by 15% though our earnings for FY13 remain
largely unchanged. We are also introducing our FY14 earnings estimate with a YoY
growth of 15.6%, factoring in benefits of 9.2 mtpa capacity addition in Q1FY14. We
are valuing the stock at 8x FY13E EV/EBITDA vs the current valuation of 8.6x FY13E
EV/EBITDA. Maintain ‘HOLD/Sector Performer’ recommendation/rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UltraTech Cement reported Q3 earnings above estimates due to one‐off
items like INR666mn subsidies related to earlier years and INR384mn in
interest subsidy. The adjusted EB/t of INR953 was below our assumption
of INR1,003/t. Cement sales volume increased 4.6% YoY but the YTD
growth remains muted at ~2% YOY. Adjusted blended realization surged
5.5% QoQ, but was offset by 7.3% increase in cost of fuel and 4.7% hike in
freight costs. With the current surge in prices being unsustainable in FY13
due to low industry capacity utilisation of 75%, we maintain ‘HOLD.’
PAT above estimates due to one‐offs
Reported PAT for the quarter at INR6.2bn was above our estimates of INR5.6bn due to
INR666mn of other operating income, related to subsidies at the Rajasthan plant for
earlier years and INR384mn in interest rate subsidy. Going ahead, ~INR160mn‐170mn
of interest subsidy is likely to continue every quarter for ~3 years.
Operating performance below estimates
Adjusted to one‐off items, the EBITDA/tonne for the quarter stood at INR953 (vs our
estimate of INR1,003). Though the adjusted blended realization surged 5.5% QoQ to
INR 4,468/t, the gain was offset by 7.3% QoQ increase in the cost of power and fuel per
tonne and 4.7% QoQ hike in the freight cost per tonne. Grey cement sales volume for
the quarter inched up by 4.6% YoY though the YTD growth remains muted at 2% YoY.
(Refer table 1 for volume break up).
Outlook and valuations: Sector concerns remain; maintain ‘HOLD’
Due to the busy season, cement prices are likely to firm up in the near term, but
we see the same as unsustainable in FY13 due to low industry capacity utilization
of 75%. Due to the high other operating income and low interest cost, our earnings
for FY12 are being revised upwards by 15% though our earnings for FY13 remain
largely unchanged. We are also introducing our FY14 earnings estimate with a YoY
growth of 15.6%, factoring in benefits of 9.2 mtpa capacity addition in Q1FY14. We
are valuing the stock at 8x FY13E EV/EBITDA vs the current valuation of 8.6x FY13E
EV/EBITDA. Maintain ‘HOLD/Sector Performer’ recommendation/rating.
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