UltraTech - 1QFY2013 Result Update - Angel Broking

During 1QFY2013, UltraTech Cement (ULTC) posted strong 13.9% yoy growth in its bottom line, which was in-line with our estimate. The robust performance was on account of substantial 11.2% yoy growth (up 6.4% sequentially) in blended realization. However, the company faced margin pressures due to the increase in raw material and freight costs. We remain Neutral on the stock.

OPM down by 217bp yoy: During 1QFY2013, ULTC's net sales grew by 16.2% yoy to Rs.5,075cr, both on account of better realization and a 4.7% yoy growth in volumes. The company's blended realization rose 11.2% yoy and 6.4% qoq to Rs.4,808/tonne. Despite the improvement in realization, OPM declined by 217bp yoy to 25.7% on account of increase in operating costs. The company's operating cost per tonne rose by 13.9% yoy and 3.9% qoq to Rs.3,584/tonne. Raw material cost per tonne rose by 17.4% yoy and 24.4% qoq to Rs.618. Freight costs per tonne rose by 28.8% yoy and 6.5% qoq to Rs.982 due to increase in diesel costs and hike in railway fare in the railway budget. While power and fuel (P&F) costs per tonne remained flat on a yoy basis, it rose by 2.1% on a qoq basis. The steep decline in INR vs USD negated the fall in global coal prices, thereby resulting in higher P&F costs.

Outlook and valuation: We expect ULTC to post an 11.5% and 9.9% CAGR in its top line and bottom line over FY2012-14, respectively. At current levels, the stock is trading at EV/tonne of US$139 on FY2014 capacity, which we believe is fair. We continue to remain Neutral on the stock.

Source : Equity Bulls

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