UltraTech Cement - 2QFY2016 Result Update - Angel Broking

UltraTech Cement (UltraTech)'s 2QFY2016 numbers have come in better than expected at the top-line and operational levels. The company's net sales rose by 4.7% yoy to Rs. 5,681.7cr, aided by better-than-expected cement volume growth of 3.9% yoy. Blended realization also increased by 1.6% yoy and was above our estimate. The EBITDA increased by 12.8% yoy to Rs. 989.1cr and the same was above our estimate of Rs. 920.7cr. Hence, the EBITDA margin came in at 17.4%, which was also above our estimate of 16.3%, mainly backed by strong operational efficiency. On the bottom-line front, the PAT came in at Rs. 393.9cr which is below our estimate of Rs. 430.6cr, mainly due to lower other income.

EBITDA margin healthy at 17.4%: For 2QFY2016, UltraTech reported an EBITDA growth of 12.8% yoy at Rs. 989.1cr as against our estimate of Rs. 920.3cr. The strong EBIDTA performance was led by operational efficiency. The operating cost/tonne declined by 0.8% yoy to Rs. 4,220, led by 11% yoy decline in power & fuel cost/tonne. The power cost declined by 7.5% yoy, mainly due to lower imported coal and pet coke prices (pet coke prices decline by 14% yoy). The EBITDA margin improved by 120bp yoy to 17.4% and is above our expectation of 16.3%. The blended EBITDA/tonne came in at Rs. 889tonne, an increase of 8.5% yoy.

Outlook and valuation: We expect UltraTech to post a 14.4% CAGR in its top-line over FY2015-17 on back of new capacity expansion and on expected healthy realizations. The company's bottom-line is expected to grow at a CAGR of 33.9% yoy over the same period. At the current levels, the stock is trading at 12.8x EV/EBITDA and at EV/tonne of US$178 on FY2017 capacity. We maintain our Accumulate rating on the stock with a target price of Rs. 3,282.

Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.2892.25 as compared to the previous close of Rs. 2914.7. The total number of shares traded during the day was 10716 in over 1303 trades.

The stock hit an intraday high of Rs. 2944 and intraday low of 2880. The net turnover during the day was Rs. 31132524.

Source : Equity Bulls

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