Reduce Ultratech Cement Ltd - Result Update - Emkay

Reco: REDUCE Ultratech Cement Ltd
CMP: Rs 1,214
Target Price: Rs 1,150

Cost Pains ahead. Downgrade to REDUCE

An in line quarter with EBITDA of Rs9.6bn (+36% yoy)- APAT of Rs51 bn (+60% yoy) Report net of Rs6.17bn boosted by subsidies led one-offs.

P&F costs continue to haunt- INR depreciation impacting imported coal prices & higher E-auction prices resulted in 8.7% sequential increase in P&F cost.

CIL's new pricing mechanism effectively a coal price hike of 28%- CIL to review prices of some grades- However we factor in 20% hike in coal prices & cut FY13 EPS by 3.9%.

Cement demand remains sluggish (12M rolling avg growth at 5.4%). UTCEM's rich valuation (PER of 14.4X & EV/t USD138) fully captures positives & ignores co's limited FCF generation & subdued return ratios. Downgrade to REDUCE.

Source : Equity Bulls

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