Buy Ultratech Cement:Strong performance, in-line quarter :Religare research

Strong performance, in-line quarter
UTCEM’s Q1FY13 results were in line with estimates as the topline/EBITDA/ PAT grew at 16%/9%/14% YoY and the company clocked a robust EBITDA/t of Rs 1,231. We expect topline growth to continue as prices remain buoyant, and accordingly upgrade our FY13/FY14 earnings estimates by 12.2%/ 12.6%. Based on 9x FY14E EV/EBITDA we arrive at a revised PT of Rs 1,880 (earlier Rs 1,740). UTCEM remains our top pick; we recommend buying on any weakness arising from the seasonal softening of cement prices.

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 Topline up 16% YoY: UTCEM’s Q1 revenues increased by 16% YoY to Rs 50.7bn as realisations/volumes increased by 10.7%/5%. The company benefited from higher cement prices (YoY) across India. Realisations increased ~6% QoQ.
 Robust EBITDA/t at Rs 1,231: The company clocked an EBITDA/t of Rs 1,231 (versus our estimate of Rs 1241), up Rs 42 YoY/Rs 151 QoQ. UTCEM’s EBITDA margin contracted by 176bps YoY to 25.5% on account of higher raw material and freight cost. However, margins expanded by 177bps on a sequential basis as realisations remain high. Although cement prices are holding firm across India, we foresee a marginal decline in the next one month as the monsoon season continues.
 PAT in line with our estimates: Higher operating profits coupled with an increase in other income resulted in a 14% YoY increase in adjusted profit to Rs 7.8bn, in line with our estimates.
 Upgrade earnings, maintain BUY: We upgrade our FY13/FY14 earnings estimates by 12.2%/12.6% on account of continued strong cement realisations. Based on 9x EV/EBITDA one-year forward, we have a revised PT of Rs 1,880 (Rs 1,740 earlier). We believe UTCEM would be a major beneficiary of an expected pick-up in cement volumes in the next 2-3 years as its expansion plans remain on track. The stock remains our top pick in the sector and should be accumulated on any declines.