Ultratech Cement earnings were ahead of our estimates. Volumes are not comparable with last year due to amalgamation of cement assets of Jaiprakash Associates but volumes were also ahead of our estimates for the quarter due to faster ramp up of JP cement plants. Blended realizations were up marginally YoY while increase in costs had put pressure on margins. Power and fuel cost and freight cost per tonne had moved up in line with ban on usage of pet coke in NCR and nearby regions as well as higher pet coke and diesel prices. We expect costs to remain high going forward owing to higher pet coke and diesel prices, increase import duty on pet coke, sand mining ban in few region etc. but improvement in blended realizations going forward is likely to aid margins. We maintain positive view on the company.
We tweak our estimates to factor in slightly higher costs and also introduce FY20 estimates. We roll forward our valuations on FY20 and arrive at a revised price target of Rs 4978 (Rs 4547 earlier) based on average of 17x EV/EBITDA and $220 per tonne EV/Tonne on FY20 estimates. We maintain BUY on Ultratech Cements. Key risk to our estimates would come from ban on pet coke usage or ban on import of pet coke lower than expected demand revival, steep increase in costs or pressure on cement prices.
Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.4368.65 as compared to the previous close of Rs. 4283.75. The total number of shares traded during the day was 9705 in over 1470 trades.
The stock hit an intraday high of Rs. 4382.55 and intraday low of 4290. The net turnover during the day was Rs. 42029651.