UltraTech Cement - Hopes pinned on new capacities; Hold - Anand Rathi

We expect UltraTech Cement to deliver 3% revenue growth yoy, led by strong realisations. EBITDA and PAT are expected to slip 6% and 7% yoy respectively, led by a 4% volume decline. Key monitorables are the outlook regarding the commissioning of new capacities. We maintain a Hold, with a price target of Rs.2,150.

- Dispatches likely to be down 4% yoy. Aggregate dispatch growth in 3QFY13 is expected to be down 4% yoy (up 4% qoq) to 9.95m tons, due to overall slackness in all-India demand, primarily in south India. Average realisation is expected to increase 7% yoy (down 5% qoq) to Rs.4,710 a ton. Accordingly, revenue is estimated to rise 3% yoy (flat qoq).

- EBITDA to decline 6% yoy. Led by healthy realizations, we expect a strong Rs.910 EBITDA per ton (against Rs.1,060 2QFY13 and Rs.930 in 3QFY12). Aggregate EBITDA is expected to decline 6% yoy (and 10% qoq) due to the drop in dispatches.

- PAT to decline 7% yoy. 3QFY13 profit is expected to decline 7% yoy (and 7% qoq), driven by the fall in EBITDA.

- Valuation. The company's all-India operations, scope to expand volumes (10m tons capacity to be added by 1QFY14 to current 49m tons), operations in the fast-growing businesses of white cement and wall putty are fundamental positives. Due to limited upside and high valuations, we maintain a Hold. At our price target of Rs.2,150, the stock would trade at 10x FY14e EV/EBITDA. The target multiple is at a 10% premium to ACC and Ambuja, given the much larger capacity of Ultratech, shortterm capacity expansion and diversification into the less volatile businesses of white cement and wall putty. The target price implies an EV/ton of US$185 and a PE of 18.7x. Risks. Coal price hikes, demand slowdown.

Source : Equity Bulls

Keywords