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Ultratech cement 2 qfy2011 result update- 261010
1. Please refer to important disclosures at the end of this report 1
Y/E March (` cr) 2QFY2011 1QFY2011 % chg qoq 2QFY2010 % chg yoy
Net revenue 3,245 1,810 79.3 1,553 109.0
Operating profit 438 425 2.9 487 (10.2)
OPM (%) 13.5 23.5 (1,002bp) 31.4 (1,788bp)
Net profit 116 243 (52.3) 251 (53.9)
Source: Company, Angel Research
UltraTech (ULTC) posted its 2QFY2011results, which for the first time reflect the
company’s financials post the Samruddhi merger. Thus, the company’s results for
2QFY2011 are not comparable with the earlier quarters both on a yoy as well as
qoq basis. However, on a like-to-like (LTL) basis, realisations were down by 13.7%
yoy to `3,533/tonne. The decline in realisation was arrested to an extent due to
ULTC’s pan-India presence post Samruddhi merger, as the company’s exposure
to the southern region reduced from 35% pre-merger to 30% post merger.
Going ahead, we expect realisations to improve due to better demand scenario
and price hikes. We remain Neutral on the stock.
Bottom line down 81.6% yoy on LTL basis: ULTC’s top line grew by 109% yoy to
`3,245cr, in line with our estimates of a 112% yoy increase. However, on an LTL
basis, net sales declined by 9.1% yoy, while despatches grew by 5.3% yoy to
9.1mn tonnes. Operating profit was down by 10.2% yoy to `438cr, impacted by
fall in realisations, increased power costs due to higher prices of imported coal
and higher freight costs and other expenses. During the quarter, net profit
declined by 53.9%. However, on an LTL basis, net profit declined by a sharper
81.6% yoy to `116cr.
Outlook and valuation: We expect ULTC to post a 42% top-line CAGR over
FY2010–12E, aided by higher volumes. At the current levels, the stock is trading
at an EV/EBITDA of 12.7x based on FY2012E estimates. We have valued ULTC at
an EV/tonne of US $110/tonne to arrive at a fair value of `1,040. We remain
Neutral on the stock.
Key Financials
Y/E March ( ` cr) FY2009 FY2010 FY2011E FY2012E
Net sales 6,383 7,103 11,499 14,329
% chg 15.9 11.3 61.9 24.6
Net profit 977 1,093 915 1,248
% chg (3.0) 11.9 (16.3) 36.4
OPM (%) 26.7 28.5 19.0 19.3
FDEPS (`) 78.5 87.8 33.4 45.5
P/E (x) 14.0 12.5 32.9 24.1
P/BV (x) 3.8 3.0 2.5 2.1
RoE (%) 31.0 26.6 11.1 9.5
RoCE (%) 24.2 24.2 11.6 10.4
EV/Sales (x) 2.5 2.1 3.0 2.5
EV/tonne ($) 152 144 142 130
Installed cap (mtpa) 22 23 52 57
EV/EBITDA 9.2 7.5 15.8 12.7
Source: Company, Angel Research; Post merger numbers for FY2011E and FY2012E
NEUTRAL
CMP `1,097
Target Price -
Investment Period -
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 64.1
MF / Banks / Indian Fls 15.3
FII / NRIs / OCBs 12.0
Indian Public / Others 8.5
Abs. (%) 3m 1yr 3yr
Sensex 12.2 20.8 5.1
Ultratech 32.6 40.2 8.4
10
20,221
6,082
ULTC.BO
UTCEM@IN
Face Value (` )
BSE Sensex
Nifty
Reuters Code
30,065
0.6
1172/700
32325
Cement
Avg. Daily Volume
Market Cap (` cr)
Beta
52 Week High / Low
Rupesh Sankhe
022-40403800; Ext 319
rupeshd.sankhe@angelbroking.com
V Srinivasan
022-40403800; Ext 330
v.srinivasan@angelbroking.com
UltraTech Cement
Performance Highlights
2QFY2011 Result Update | Cement
October 26, 2010
3. UltraTech Cement | 2QFY2011 Result Update
October 26, 2010 3
Exhibit 3: 2QFY2011 – Actual v/s Angel estimates
(` cr) Actual Estimates Variation (%)
Net sales 3245 3267 (0.7)
Operating profit 438 555 (21.2)
Net profit 116 268 (56.9)
Source: Company, Angel Research
Operational performance
For 2QFY2010, ULTC’s realisation/tonne fell by 13.7% yoy to `3,533, primarily
due to price fall in the southern and western regions. However, it should be noted
that the decline in realisations was arrested to an extent due to the company’s
pan-India presence post Samruddhi merger, as ULTC’s exposure to the southern
region reduced from 35% pre-merger to 30% post merger. Raw-material
cost/tonne grew by 69.3% yoy. Power cost/tonne increased by 22.1% yoy, thereby
impacting operating margins. Freight costs/tonne rose by 5.9% yoy due to
increased diesel costs. Operating profit/tonne stood at `448, down 58.1% yoy.
Net profit/tonne for the quarter was down by 75.5% yoy to `127.
Exhibit 4: Operating performance trend
Particulars (`) 2QFY11 1QFY11 2QFY10 %chg yoy % chg qoq
Realisation/tonne* 3,533 3,650 4,094 (13.7) (3.2)
Raw-material cost/tonne 510 494 301 69.3 3.3
Power & fuel cost /tonne 927 810 759 22.1 14.5
Freight cost/tonne 715 695 675 5.9 2.9
Operating profit/tonne 448 786 1069 (58.1) (43.0)
Depreciation/tonne 240 197 228 5.2 21.9
Net profit/tonne 127 377 520 (75.5) (66.2)
Source: Company, Angel Research; Note: *Realisation/tonne computed on LTL basis for prior
quarters, while other items have been computed based on reported numbers.
Key developments
ULTC’s wholly owned subsidiary, UltraTech Cement Middle East Investments
Limited, has completed the acquisition process of ETA Star Cement along with its
operations in UAE, Bahrain and Bangladesh. It has also acquired management
control. Thus, with the merger of Samruddhi and with ETA acquisition, the
company’s installed capacity currently stands at 52mtpa.
4. UltraTech Cement | 2QFY2011 Result Update
October 26, 2010 4
Investment arguments
Emerged as India’s largest cement manufacturer: After the merger with Samruddhi
(erstwhile cement division of Grasim), ULTC has become India’s largest cement
player with pan-India presence. The company has also acquired the overseas
cement assets of Dubai-based ETA Star, which would take its overall capacity to
52mn tonnes. ETA Star’s manufacturing facilities include a 2.3mtpa clinkerisation
plant and a 2.1mtpa grinding capacity in the UAE; and 0.4mtpa and 0.5mtpa of
grinding facilities in Bahrain and Bangladesh, respectively. In addition, ULTC is set
to embark on its next round of expansion, and the company has envisaged a
capital outlay of `5,600cr to enhance its capacity by 9.2mtpa. The expansion
would come by setting up brown-field expansion at the Chhattisgarh and
Karnataka plants.
Pan-India presence to insulate ULTC from price volatility: Post the Samruddhi
merger, ULTC enjoys strong brand equity and is insulated from wide variation in
regional demand and price volatility. The company is also expected to enjoy
synergic benefits in terms of superior operating efficiencies due to its larger size.
Increased use of captive power to protect margins: Currently, ULTC has 580MW of
power capacity. The company is setting up another 86MW of capacity, which,
when commissioned, would cater to 80% of its overall power requirements in
FY2012E. Besides, an increase in blending, aided by its grinding unit, will likely
result in increased overall efficiency and lower power consumption from the
current 87units/tonne to about 80units/tonne.
Outlook and valuation: We expect ULTC to post a 42% CAGR in top line over
FY2010–12E, aided by higher volumes. At the current levels, the stock is trading at
an EV/EBITDA of 12.7x based on FY2012E estimates. We have valued ULTC at an
EV/tonne of US $110 to arrive at a fair value of `1,040. We remain Neutral on the
stock.
Exhibit 5: One-year forward EV/tonne band
Source: Company, Angel Research
0
10,000
20,000
30,000
40,000
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
EV 70$ 100$ 130$ 160$(` cr)
10. UltraTech Cement | 2QFY2011 Result Update
October 26, 2010 10
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement UltraTech Cement
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
