Ultratech Cement (UTCEM IN) - Reasonably strong quarter, let by better realisation - CSEC Research

Reasonably strong quarter, let by better realisation

- UTCEM posted a revenue growth of 3%YoY (18% QoQ) to INR 65.95bn due to increase in volumes by 1% YoY (20% QoQ) to 14.07mt, and increase in blended realization by 3% YoY to INR 4,689/tn.

- Total cost grew by 5.8% YoY to INR 53.2bn (Blended total cost/ton grew by 2% YoY to INR 3780) on the back of increase in Power & fuel cost and other expenses (+10% YoY driven by higher packaging and maintenance cost).

- Raw material cost increased by 2.2% YoY to INR 11.5bn (Blended Raw material cost/ton increased 2 %YoY to INR 818). Freight cost increased by 1.7% YoY to INR 16.6bn on the back of increase in diesel prices.

- Power and fuel cost increased by 13.6% to INR 11.5bn (Power cost/ton up 13%YoY to INR 821) due to high pet coke consumption (71%), WHRS (Waste heat recovery system) share in total power is 7%. Fuel mix for the company is 71%, 21% & 8% of pet coke, imported coal and Indigenous coal & others respectively. Average pet-coke cost for 4QFY17 stood at US$87/t Vs US$42 in 4QFY16 / US$78 in 3QFY17.

Valuation: At CMP the stock trades at consensus EV/EBITDA 18.1X and 14.0X FY18E&19E respectively. We assign an Outperformer rating on the stock with a target price of INR 4,555 based on EV/EBITDA multiple of 15X on FY2019 consensus estimates. Increased capacity coupled with higher capacity utilization (due to expected improvement in industry's demand-supply dynamics for the industry), development activities in AP & Telangana, affordable housing and interest subvention scheme, steady cement prices and strong margins from Grey cement business augurs well for the company going ahead.

Risks: Slow demand recovery, Delay in execution of Government projects, any slowdown in urban real estate and increase in fuel prices, volatility in cement prices.

Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.4323.35 as compared to the previous close of Rs. 4320.35. The total number of shares traded during the day was 30359 in over 659 trades.

The stock hit an intraday high of Rs. 4341.95 and intraday low of 4287.15. The net turnover during the day was Rs. 130587148.

Source : Equity Bulls

Keywords