UltraTech Cement - Q2FY21 Result Update - ICICI Securities

Cement demand improved and remained buoyant in Q2FY21 as well, mainly contributed by rural segment. North, east and central regions showed a healthy pick-up throughout the quarter whereas demand in south and Maharashtra region saw a late recovery. The company ended Q1FY21 with 69% capacity utilisation. Of the total sales volume, retail sales contribution improved to 71% vs 66% last year. However, it came down from 78% in Q1FY21 due to pick-up in demand from infra segment. On the cost front, the company reduced fixed overheads by 14% YoY during the quarter and achieved cost savings of Rs. 450 crore in H1FY21 itself against targeted annual savings of ~Rs. 500 crore. Further, with the help of low cost petcoke inventory ($71/t) and reduction in other costs, total cost of production (CoP) came down by 7.4% YoY to Rs. 3887/t (flat QoQ). Thus EBITDA/t improved sharply by 30% YoY to Rs. 1329/t. In terms of acquired assets, Nathdwara unit operated at 60% utilisation with EBITDA of Rs. 1500/t whereas Century assets operated at 68% with an EBITDA of Rs. 700/t. The plants at present are running at over 80% utilisation on companywide capacity, which clearly indicates strong demand momentum to in Q3FY21 as well. While the rise in petcoke and diesel prices possess risk to further margin expansion, the various efficiency measures initiated by company would continue provide cushion against risk of sharp increase in the CoP, going forward.

Valuation & Outlook

UltraTech has showed its capability to successfully integrate the acquired assets and protect its B/S in tough time as well. Its pan-India presence, strong management pedigree should augur well in future. Thus, we maintain our BUY rating with revised TP of Rs. 5,350 (i.e. at 13.5x FY22E EV/EBITDA).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_UltraTech_Q2FY21.pdf

Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.4629.6 as compared to the previous close of Rs. 4547.4. The total number of shares traded during the day was 50704 in over 8926 trades.

The stock hit an intraday high of Rs. 4656.9 and intraday low of 4439.5. The net turnover during the day was Rs. 231911711.

Source : Equity Bulls

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