Ultratech Cement - Operationally on track - Elara

Lower volumes and margins hurt bottomline

UltraTech's operating profit was in line with our expectations (INR12bn vs our estimate of INR12.6bn) but net profit was marginally (8%) lower due to lower than expected other income and higher tax rate. Revenues for the quarter grew by 1% YoY(10.9% QoQ) to INR54 bn. EBITDA margins fell by 140 bps YoY (up 120 bps QoQ) to 22.3%. Adjusted net profit witnessed a decline of 16.3% YoY to Rs.7.3 bn due to fall other income and lower margins.

Volumes and realisations remain weak due to subdued demand

Sales volume fell by 3.3% YoY to11.4mn tonnes due to subdued demand. Realisations for the quarter fell by INR50/tonne QoQ(-0.9% QoQ and 4.4% YoY) to INR4,717/tonne as cement prices remained under pressure in western and southern region

Cost pressure ease

Cost per tonne fell by 2.4% QoQ due to fall in power and fuel cost. Power and fuel cost declined by 12.9% QoQ and 8.3% YoY due to fall in fuel prices and increase in usage of petcoke.

The EBITDA per tonne for the quarter stood at INR1,050, as compared to INR 1,004 in Q4 FY12 and INR1,070 in Q3FY13.

Valuations

At CMP of INR 1,870 stock is trading at EV per tonne of USD 137 per tonne on FY15 capacity. We believe that company will grow faster than its peers due to timely capacity additions. However, we believe that earnings for the company will be backend in FY14 on account of time required for the capacity to ramp up. We are maintaining our Accumulate rating on the stock with price target of INR 2,175.

Source : Equity Bulls

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