Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UT 3Q results were better than our forecasts, but that said, the key factor behind the 13% pricing
improvement qoq was production discipline among the players. The industry operates at a
capacity utilisation rate of 75%, hence is prone to price corrections. We remain cautious.
UltraTech reports strong qoq improvement in EBITDA
UltraTech has reported EBITDA of Rs7.07bn, which was up sharply from Rs4.08bn in
2QFY11. It has reported an EBITDA/mt of Rs770/mt as compared to Rs450/mt in 2QFY11.
Almost all the improvement is driven by higher cement prices, as volumes were up just 0.8%
qoq. However, on a like-for-like basis, the underlying EBITDA on a yoy basis is lower by
24.6%. Grasim's cement business was merged into UltraTech in FY11, hence the reported
numbers are strictly comparable for yoy comparison. During 3QFY11, volume growth was
depressed due to a variety of factors: prolonged monsoons, lower realty and infrastructure
spending and de-growth in the markets in South India where UltraTech sells around 30% of
its production.
We remains cautious on the underlying earnings drivers
While, we do expect cement demand to pick up from the low base of 3QFY11, we are
concerned about the demand-supply imbalance which still persists. The cement industry
added 60mmt of capacity in FY10, and in FY11 so far the capacity additions have been
14mmt. Even assuming demand growth of 8-9%, incremental demand in a year is expected to
be around 20mmt. Hence, we clearly, see a 15-month period of oversupply, when the
capacity utilisation rate should remain below 80%. Besides, the recent buoyancy in coal
prices (rise from US$92 in 3QFY10 to US$125 in 3QFY11) could strain margins when pricing
pressure returns.
UT is set to achieve our FY11 earnings estimates
The company has achieved EPS of Rs36.22 in FY11 so far with the 3Q FY11 EPS at
Rs11.64. Our full-year estimate is Rs53.5, which seems achievable, as cement volume in
4QFY11 is typically better. Given our cautious view on cement pricing, we have an EPS
forecast of Rs42 for FY12. The stock trades at US$142 EV/mt, and at 19x FY11F earnings.
While cement prices have sustained the rally recorded in 3QFY11, we still see downside risks
The company has achieved EPS of Rs36.22 in FY11 so far with the 3Q FY11 EPS at
Rs11.64. Our full-year estimate is Rs53.5, which seems achievable, as cement volume in
4QFY11 is typically better. Given our cautious view on cement pricing, we have an EPS
forecast of Rs42 for FY12. The stock trades at US$142 EV/mt, and at 19x FY11F earnings.
While cement prices have sustained the rally recorded in 3QFY11, we still see downside risks
to prices, as the key factor for pricing stability is production discipline. Given the fragmented
structure of the industry, we would be cautious on the sustainability of the same.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UT 3Q results were better than our forecasts, but that said, the key factor behind the 13% pricing
improvement qoq was production discipline among the players. The industry operates at a
capacity utilisation rate of 75%, hence is prone to price corrections. We remain cautious.
UltraTech reports strong qoq improvement in EBITDA
UltraTech has reported EBITDA of Rs7.07bn, which was up sharply from Rs4.08bn in
2QFY11. It has reported an EBITDA/mt of Rs770/mt as compared to Rs450/mt in 2QFY11.
Almost all the improvement is driven by higher cement prices, as volumes were up just 0.8%
qoq. However, on a like-for-like basis, the underlying EBITDA on a yoy basis is lower by
24.6%. Grasim's cement business was merged into UltraTech in FY11, hence the reported
numbers are strictly comparable for yoy comparison. During 3QFY11, volume growth was
depressed due to a variety of factors: prolonged monsoons, lower realty and infrastructure
spending and de-growth in the markets in South India where UltraTech sells around 30% of
its production.
We remains cautious on the underlying earnings drivers
While, we do expect cement demand to pick up from the low base of 3QFY11, we are
concerned about the demand-supply imbalance which still persists. The cement industry
added 60mmt of capacity in FY10, and in FY11 so far the capacity additions have been
14mmt. Even assuming demand growth of 8-9%, incremental demand in a year is expected to
be around 20mmt. Hence, we clearly, see a 15-month period of oversupply, when the
capacity utilisation rate should remain below 80%. Besides, the recent buoyancy in coal
prices (rise from US$92 in 3QFY10 to US$125 in 3QFY11) could strain margins when pricing
pressure returns.
UT is set to achieve our FY11 earnings estimates
The company has achieved EPS of Rs36.22 in FY11 so far with the 3Q FY11 EPS at
Rs11.64. Our full-year estimate is Rs53.5, which seems achievable, as cement volume in
4QFY11 is typically better. Given our cautious view on cement pricing, we have an EPS
forecast of Rs42 for FY12. The stock trades at US$142 EV/mt, and at 19x FY11F earnings.
While cement prices have sustained the rally recorded in 3QFY11, we still see downside risks
The company has achieved EPS of Rs36.22 in FY11 so far with the 3Q FY11 EPS at
Rs11.64. Our full-year estimate is Rs53.5, which seems achievable, as cement volume in
4QFY11 is typically better. Given our cautious view on cement pricing, we have an EPS
forecast of Rs42 for FY12. The stock trades at US$142 EV/mt, and at 19x FY11F earnings.
While cement prices have sustained the rally recorded in 3QFY11, we still see downside risks
to prices, as the key factor for pricing stability is production discipline. Given the fragmented
structure of the industry, we would be cautious on the sustainability of the same.
No comments:
Post a Comment