Motilal Oswal Neutral on Ultratech Cement

ULTRATECH CEMENT 3QFY11: Below est as volumes disappoint; Mgmt expects gradual recovery from trough; Neutral

Results are not comparable YoY due to merger of Samruddhi Cement. 2QFY11 are rebased for QoQ comparisons.

Volumes were flat YoY (~7% QoQ growth) on like-to-like basis at 9.8MT (vs est 10.1MT). Grey cement realization at Rs3,159/ton (up 7% QoQ; est Rs3,192/ton).

Sales were at Rs37.1b (vs est Rs38.2b) and PAT at Rs3.19b (vs est Rs3.47b).

EBITDA was up by 74% QoQ at Rs7.08b (vs est Rs7.44b), EBITDA margin at 19.1% (~640pp QoQ recovery) and EBITDA/ton of Rs712 (vs est Rs695).

The management believes trough in the cycle is behind us and expects gradual recovery in margins to normal levels by FY13.

2HCY10 is expected to be bottom-of-the-cycle period for the cement industry. Cement prices are expected to be buoyant in 1HCY11 driven by recovery in demand. We maintain our estimates for FY12E at Rs62.8 and for FY13 to Rs96.9, as upgrade in pricing assumption is negated by lower volumes and higher cost push. The stock trades at 16.2x FY12 and 10.5x FY13 EPS, and EV/Ton of US$123. Maintain Neutral with target price of Rs1,254 (~10x FY12 EV/EBITDA).

Source : Equity Bulls

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