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Published on 13/02/2018 11:19:08 AM | Source: Arihant Capital Markets Ltd

Hold Ultratech Cement Ltd For Target Rs.4,784.00 - Arihant Capital

For the quarter Q3 FY18 Ultratech Cement’s realizations de-grew by 1.35% on a YoY basis. Domestic sales volume increased by 37.1% to 15.1 mnt while the total volumes grew by 44% to 15.9 mnt YoY.

On consolidated basis the revenue for the quarter stood at Rs 8019 cr vs. Rs 6761 cr Y-o-Y. EBITDA margins contracted by 300 bps to 17% on Y-o-Y basis. Net profit after tax for the quarter decreased by 23% YoY on consolidated basis to Rs 457 cr while standalone PAT stood at Rs. 421 cr. Total comprehensive income for the quarter stood at Rs 459 cr vs. Rs 673 cr on consolidated basis, a fall of 32% YoY.

Energy cost increased by 21% to Rs 949/t vs. Rs.785/t. Impacted by increased petcoke prices by 33% at USD$ 104/t and higher usage of industrial waste. Logistics costs increased by 3% to Rs.1127/t. Raw materials cost increased by 14% YoY to Rs.476/t on increased usage of additives.

Conference Call Highlights

1. The management stated that prices have dropped in most parts of the country, especially in South where prices dropped nearly 10%. Western markets saw a drop of 3% to 4% while Northern markets increased by about 2% QoQ. Eastern markets also increased by about 5%. On a pan-India basis, price corrections have been 4% to 5%.

2. The capacity utilization for the company was 80% in North, 60% in Central, 80% in East , 70% in West and 53% in South. Capacity utilization of JPA assets currently stands at 60% versus 51% during Q2FY18.

3. The company witnessed efficiency improvement to the extent of 4%. They have improved efficiency of the WHRS system, and are planning to invest in 2 more WHRS plants thereby adding 26 MW in FY19 to the current 59MW.

Valuations: We have valued the stock using EV/EBITDA(x) and have ascribed EV/EBITDA multiple of 20.5(x) to its FY19E estimates & arrived at fair value of Rs. 4,784 per share. We have ‘HOLD’ rating on the stock.

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