Buy Ultratech Cement Ltd For Target Rs.8,600 - Yes Securities
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Our view and valuation: Beat on all fronts
* Ultratech delivered strong numbers on all front wherein volumes/EBITDA for the Q1FY22 grew by 47%/54.9% on YoY basis while it beat our estimates by 11.8%/40.6% which was driven lower clinker cost and higher than expected net realisations.
* We upgrade our EBITDA estimates by 12.6%/13.5% for FY22E/FY23E respectively, primarily on the back of 1. Realigning raw material, fuel and transportation cost which we estimated higher and 2. Better pricing outlook as compared to our previous expectations. Considering progressive deleveraging (estimated Net debt ‐ve by FY23E) and with upgraded EBITDA we believe Net debt/EBITDA is set to decline faster and turn negative 0.06x from 0.66x over FY21‐23E (Q1FY22 Net Debt/EBITDA 0.44x).
* Currently, at CMP of Rs7460/share, Ultratech trades at 14.2x of FY23E EV/EBITDA. On the back of higher demand outlook and better than expected profitability we assigned 16x FY23E EV/EBITDA which translates in price target of Rs8,600/share with potential upside of 15.3% upside (previous TP of Rs7,540/share). We maintain our BUY rating on stock.
Result Highlights:
* Company reported consolidated/India operations volume of 21.53MT/20.53MT represents growth of 47% YoY for the quarter. Also, NSR/te for consolidated/India operations witnessed growth of 4.7%/5.6% YoY.
* Revenue/EBITDA/PAT grew by 55%/59.4%/113.5% YoY to Rs118.3bn/ Rs33.1bn/Rs17bn. Ultratech reported strong EBITDA margin for quarter at 28% (up by 234bps QoQ/78bps YoY) on the back of tight cost control initiatives.
* RMC and white cements sales came in at Rs5.1bn/Rs3.6bn representing growth of 291%/47% YoY.
* Company’s expansion plan of 19.5MT remains on track and management expects to commission 3.2MT plant in Q2FY22, while plans to add 3.5MT in Q1FY23, 0.6MT in Q2FY23, 9.4MT in Q3FY23 and 2.8MT in Q4FY23. Also, Dalla super unit received (2.3MT clinker capacity) stage‐1 approval. Company added 4 new RMC plants in Q1FY22.
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