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MOSL: Morning India (19/October/21): 1. UltraTech Cement (Strong growth visibility; higher costs a near-term concern); 2. L&T Infotech; 3. Real Estate

MOrning India (19/October/21): 1. UltraTech Cement (Strong growth visibility; higher costs a near-term concern); 2. L&T Infotech; 3. Real Estate

 

Today’s top research idea

UltraTech Cement: Strong growth visibility; higher costs a near-term concern

• UTCEM reported an 8%/7% YoY growth in volume/blended realization. EBITDA margin declined by 339bp YoY to 22.6% due to energy cost inflation, which was further accentuated by higher maintenance and employee costs. EBITDA remained largely flat YoY at INR27.1b (-18% QoQ).
• Market share gains should continue, aided by the ongoing 20mtpa expansion program (1.2mtpa commissioned in Oct'21), which should drive a 10% volume CAGR over FY21-24E.
• We estimate an 12%/19% CAGR in consolidated EBITDA/adjusted PAT over FY21-24E, driven by 10% volume CAGR, better realizations, and lower interest costs. Higher fuel prices remain a key risk to earnings growth.
• The stock trades at 14.9x/12.6x FY23E/FY24E EV/EBITDA (v/s its 10-year average one-year forward EV/EBITDA of 14.3x). We value UTCEM at 16x Sep'23E EV/EBITDA to arrive at our TP of INR8,700. We reiterate our Buy rating.

Piping hot news

India's trade deficit widens to record $22.6 bn in September; exports rise 23%

India's merchandise exports in September have risen 22.6% over last year to $33.79 billion on better performance by key sectors like engineering goods and petroleum products, according to the data from ministry of commerce. Imports have increased significantly, by nearly 85% year-on-year to $56.4 billion.