HDFC Securities - Maintain BUY on UltraTech Cement - Solid show!

Ms. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

UTCEM delivered yet another stellar quarter, as its 3QFY21 consolidated net sales/EBITDA/APAT soared 17/47/98% YoY to Rs 122.5/30.9/15.8bn respectively. It is driven by a robust 14% volume growth (2x industry growth) and superior opex controls (down 4% YoY). Healthy realisation also boosted the gains. The company further lowered its working capital, reducing net debt/EBITDA to 0.9x (vs 1.8x in Mar'20). We continue to like UTCEM for its strong volume focus along with superior margin delivery and working capital controls. We maintain BUY with a higher target price of Rs 6,720/share (16x Dec'22E consolidated EBITDA).

Results highlights: Grey sales volume/revenues surged 14/17% YoY riding on strong traction across both trade and non-trade segment. Utilisation firmed up to 83% vs 74% YoY. While segmental NSR cooled off 3% QoQ, it remained 2% higher YoY. Even RMC and white/putty revenues jumped 24/17% YoY. Despite rising fuel and diesel prices QoQ, UTCEM's opex remained stable through improved efficiency, fixed cost controls, and op-lev gains. Thus, opex fell 4% YoY, bolstering blended unitary EBITDA by 28% YoY to Rs 1,296/MT (vs our estimate of Rs 1,151/MT). Robust EBITDA, continued working capital reduction, and low capex spend reduced net debt by 20% QoQ.

Outlook: UTCEM continues to deliver on all the fronts - market share gain, margin expansion, and working capital reduction, thereby bolstering its cash flows and return ratios. We increase our consolidated EBITDA estimates for FY21/22/23E by 10/7/7% to factor in strong growth momentum and cost controls. We maintain BUY with a higher target price of Rs 6,720/share (16x Dec'22E consolidated EBITDA).

Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.5363.25 as compared to the previous close of Rs. 5531.15. The total number of shares traded during the day was 97102 in over 16583 trades.

The stock hit an intraday high of Rs. 5829.9 and intraday low of 5330. The net turnover during the day was Rs. 545356702.

Source : Equity Bulls

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