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UBS Investment Research
UltraTech Cement
Q3FY11 results: PAT in-line
Operating performance slightly below UBS-e, slightly ahead of consensus
Ultratech reported net sales of Rs37.4bn (+2% y/y, +16% q/q; UBS-e Rs37.8bn),
operating profit of Rs7.3bn (-25% y/y, +80% q/q; slightly below our estimate of
Rs7.6bn and slightly ahead of consensus estimate of Rs7bn) and PAT of Rs3.2bn
(down 36% YoY, +176% QoQ; in-line with our estimates and marginally ahead of
consensus expectations). Domestic cement and clinker volumes increased 1%
YoY to 9.2mt (up 4% QoQ).
Domestic cement realisation grew 12% sequentially
Net domestic cement realisation increased 12% QoQ (after the significant decline
in the monsoon quarter), though on a YoY basis they are still lower by ~3%. Total
cost per ton have remained largely stable on a QoQ basis, though there has been a
~7% increase in per ton freight costs. Muted volume growth during the quarter has
been attributed to prolonged monsoon, lower spending on real estate/infrastructure
and de-growth in South India. We expect to receive more details on the
management outlook in Grasim’s conference call on 27 January at 9am.
Star Cement capacity utilization at 80% during the quarter
Star cement, recently acquired by Ultratech, had volumes of 0.8mt in the quarter,
with a positive EBITDA and a net loss of Rs270m. White cement volumes grew by
10% to 0.14mt and realisation grew by 5%. Wall care putty volumes grew by 35%.
Valuation: maintain Sell and PT of Rs1,030
We value Ultratech at a one-year forward EV/EBITDA of 6.5x. We are cautious on
the near-term outlook for the cement sector in India and maintain our Sell rating.
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
Q3FY11 results: PAT in-line
Operating performance slightly below UBS-e, slightly ahead of consensus
Ultratech reported net sales of Rs37.4bn (+2% y/y, +16% q/q; UBS-e Rs37.8bn),
operating profit of Rs7.3bn (-25% y/y, +80% q/q; slightly below our estimate of
Rs7.6bn and slightly ahead of consensus estimate of Rs7bn) and PAT of Rs3.2bn
(down 36% YoY, +176% QoQ; in-line with our estimates and marginally ahead of
consensus expectations). Domestic cement and clinker volumes increased 1%
YoY to 9.2mt (up 4% QoQ).
Domestic cement realisation grew 12% sequentially
Net domestic cement realisation increased 12% QoQ (after the significant decline
in the monsoon quarter), though on a YoY basis they are still lower by ~3%. Total
cost per ton have remained largely stable on a QoQ basis, though there has been a
~7% increase in per ton freight costs. Muted volume growth during the quarter has
been attributed to prolonged monsoon, lower spending on real estate/infrastructure
and de-growth in South India. We expect to receive more details on the
management outlook in Grasim’s conference call on 27 January at 9am.
Star Cement capacity utilization at 80% during the quarter
Star cement, recently acquired by Ultratech, had volumes of 0.8mt in the quarter,
with a positive EBITDA and a net loss of Rs270m. White cement volumes grew by
10% to 0.14mt and realisation grew by 5%. Wall care putty volumes grew by 35%.
Valuation: maintain Sell and PT of Rs1,030
We value Ultratech at a one-year forward EV/EBITDA of 6.5x. We are cautious on
the near-term outlook for the cement sector in India and maintain our Sell rating.
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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