Ultratech Cement - Q3FY21 First Cut - ICICI Direct

(CMP: Rs. 5,535; Mcap: Rs. 1,59,755 crore)

Ultratech Cement reported healthy set of numbers for Q3FY21. Better than expected sales volumes along with reduced power costs helped the company to report better operating results.

Q3FY21 Earnings Summary

- Standalone revenues for the quarter stood at Rs. 11,831 crores (vs. I-Direct est: Rs. 11,097 crore). Sales volume remained ahead of our estimates at 22.8MT (up 14.1% YoY, 18.8% QoQ) while the realisations remained marginally above our estimates at 5,184/t (vs I-direct est: 5,111/t). It increased by 3.9% YoY but remained flat QoQ.

- Capacity utilization improved to 80% vs 73% last year. In terms of regions, East operated with 100% capacity utilization while utilsaitons levels in South remained at 70%. Rest all regions like North, West and Central operated with average of 80% capacity

- On the profitability front, EBITDA margins expanded by 700bps YoY to 24.9% that remained ahead of I-direct estimated EBITDA margins of 22.6%. Better asset utilisations and use of low cost fuel inventory kept the cost of production lower by 5% YoY on per tonne basis that helped the company to achieve better margins. The company has mentioned that the full impact of higher petcoke prices would get reflected in numbers from Q1FY22 onwards.

- On absolute basis, the company reported EBITDA of Rs. 2,944 crore (up 64.9% YoY) vs. I-direct estimates of Rs. 2,509 crore while EBITDA/t for the quarter stood at Rs. 1,290/t (vs I-direct est of Rs. 1,155/t). PAT growth of 141% YoY to Rs. 1,550 crore is mainly attributable to improved sales volumes along with reduced costs.

- On the leverage front, the company has successfully reduced its Net Debt / EBITDA ratio to 0.73x from 1.74x last year and 1.1x last quarter. On absolute basis, the net debt for the year is reduced from Rs. 12,132 crore in Sep-20 to Rs. 9,436 crore as of Dec-20. The board has approved fund raising of Rs. 3000 crore to mainly take an advantage of interest arbitrage opportunities.

- On the recent announcement of entering into paint business by Promoter Grasim Industries, the company has clarified that it will continue to focus on the cement business only. However, there can be a possibility of cross selling opportunities depending upon the situation.

The Company's strong quarterly performance is on the back of operational efficiencies and its ability to serve all India markets. With prudent working capital management, and overall efficient operations, the company has shaved off Rs. 7,424 crore of net debt in the first nine months of this fiscal year. On the M&A front, the 14.6MT cement plants acquired during the previous financial year have been well integrated and operating with capacity utilisations of over 80%. The work on the Company's 3.4MT cement capacity addition in Odisha, Bihar and West Bengal has picked up pace and are expected to get commissioned during FY22E, in a phased manner. With strong rural growth, revival in manufacturing and govt backed high infrastructure push, we believe, Ultratech is well poised to capture the growth along with its timely expansion plans. We continue to remain positive on the company.

We would be coming out with a detailed report soon.

Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.5592 as compared to the previous close of Rs. 5543.3. The total number of shares traded during the day was 11099 in over 2233 trades.

The stock hit an intraday high of Rs. 5592.7 and intraday low of 5474. The net turnover during the day was Rs. 61485517.

Source : Equity Bulls

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