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Result Synopsis

Ultratech Cement (UTCEM) volume dipped sequentially by 8% to 23.1MT (+7% y/y; 24.4MT YSEC est.) while reported strong NSR of Rs6014/te (-1% q/q & +8% y/y) translates in revenue of Rs138.9bn declined by 8% q/q (+16% y/y) in Q2FY23. For the quarter, UTCEM reported lower EBITDA/te of Rs808 due to alleviated cost/te of Rs5206 (+8% q/q & +21% y/y) while strong NSR partially offset it. EBITDA/PAT of Rs18.6/7.5bn in Q2FY23, declined by 40/52% q/q and 31/43% y/y due to alleviated cost coupled muted volumes due to monsoon. H1FY23 EBITDA declined to Rs1,031/te (26% y/y) on account of surge in power cost by +51% y/y causing total cost to go up by +21% y/y. So, we have trimmed our EBITDA & PAT estimate by 13% & 23% for FY23E. In Q2FY23, the company commissioned 1.3MTPA of integrated unit at Dalla (UP) taking the total capacity to ~116MTPA and expected to reach at 154MTPA by FY25E (excl. 5.4MTPA of overseas capacities). Phase-I (remaining 15.4MTPA) & newly announced (22.6MTPA) expansion will aid UTCEM to grow at ~9% CAGR (v/s industry 6% CAGR) over FY23-25E. Additionally, UTCEM is committed to increase its green energy share to 36% (WHRS 28% & RE 8%) by FY25E v/s 19.5% in Q2FY23. As UTCEM to increase its WHRS/RE capacity aggressively in Phase-I expansion to 675MW (302MW WHRS & 373MW RE) by FY24E will improve its efficiency. Further in Phase-II, UTCEM plans to add incremental 50- 60MW to reduce the thermal power dependency to 50% by FY25E v/s 65% in FY22. We expect healthy FCF generation of Rs61bn post CAPEX outlay of Rs132bn over FY23-24E allows further deleveraging. We maintain BUY rating with a TP of Rs8,453, valuing the stock at 16.5x EV/EBITDA on the FY24 estimates.

Result Highlights

* UTCEM reported console volume of 23.1MT (v/s YSEC est. of 24.4MT) up by 7% y/y on account of incremental capacity, while ongoing monsoon resulted in sequential fall of 8% in Q2FY23.

* Owing to higher premium cement & trade sales, UTCEM reported strong NSR of Rs6014/te (+8% y/y) in Q2FY23 translates in revenue of Rs138.9bn up by +16% y/y but decline by 8% q/q over muted sequential volume (YSEC est. of Rs142.9bn).

* UTCEM total cost/te increased by 21% y/y and 8% q/q (power/freight & other cost/te up by 60/7/9% y/y), dented EBITDA/te by ~36% y/y and q/q to Rs808 in Q2FY23 (v/s YSEC of Rs1031/te).

* UTCEM delivered an EBITDA margin of 13.4% in Q2FY23 against 22.6% in Q2FY22 (v/s 20.4% in Q1FY23). EBITDA/PAT witnessed decline of 31/43% y/y and 40/52% q/q to Rs18.6/7.5bn in Q2FY23 respectively.

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