UltraTech Cement - Rating: Hold; Target price: Rs1,615 - Centrum

We expect net sales to decline 3.3% YoY to Rs47bn. Sales volume is expected to decline 3.9% YoY to 9.6mt. Domestic grey cement realization is expected to increase 2% YoY to Rs4,166/tonne.

EBITDA is expected to decline 24.6% YoY to Rs7.7bn primarily due to lower sales volume, fall in realization and higher op. costs. Op. cost/tonne is expected to increase 2.4% YoY due to higher raw material, freight and other costs.

EBITDA margin is expected to be 16.5% vs. 21.1% in Q3FY13 and 14.7% in Q2FY14. Blended EBITDA/tonne is expected to be Rs808 against Rs1,030 in Q3FY13 and Rs710 in Q2FY14.

Depreciation is expected to increase 8.9% YoY to Rs2.6bn due to the commissioning of new plants in Q1FY14. Adjusted PAT is expected to decline 41.3% YoY to Rs3.5bn. Adjusted PAT margin is expected to be 7.5% against 12.4% in Q3FY13 and 5.9% in Q2FY14.

Earnings and target price revised downwards: We are reducing sales volume estimates by 1.8%/1.5%/1.1% for FY14E/FY15E/FY16E on the back of sluggish demand during the quarter. We have revised realization assumptions downwards by 2.6%/1.2%/1.4% for FY14E/FY15E/FY16E considering pressure on cement prices recently. Due to lower realization and sales volume estimates our EBITDA estimates are getting revised downwards by 12.2%/9.1%/8.8% for FY14E/FY15E/FY16E. We maintain Hold rating on the stock with a revised price target of Rs1,615 (earlier: Rs1,813), downside of 8.5% from the CMP.

Source : Equity Bulls

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