'Hold' on Ultratech Cement - Geojit BNP Paribas

'Hold' rating is maintained on Ultratech Cement on better than expected performance in 4QFY12.

The company reported EBITDA at Rs.1320 crore for the quarter, beating estimates of the street.

Recurring PAT at Rs.870 crore is also above market expectations.

Higher than expected EBITDA for the quarter was due to higher than expected average sales price.

Average sales price (ASP) at Rs.4821/ton increased 3% qoq and 11% yoy. Operating expenses at Rs.3679/ton was in line with forecast.

EBITDA at Rs.1192/ton increased 12% due to higher than expected ASP.

Higher than expected PAT was also helped by higher than expected other income and lower than expected interest expenses.

While cement demand is showing signs of improvement, cost pressure still exist to Ultratech and the cement industry as a whole in the form of proposed coal price hike by Coal India and increase in diesel prices.

Negative ruling by Competition Commission of India (CCI) in the ongoing investigations of cartelization by the cement industry may also lead to de-rating of valuation multiples.

Considering all these possibilities, the stock is valued at 8.00 x FY13 expected EV/EBITDA and arrived at a target price of Rs.1084. Currently, the stock is traded at Rs.1467 range (10.5x FY13 expected EV/ EBITDA).

Source : Equity Bulls

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