MOSL: ULTRATECH CEMENT (Buy)- Results above estimates led by focus on cost control
​Ultratech Cement: Results above estimates led by focus on cost control
(UTCEM IN, Mkt Cap USD17.4b, CMP INR4234, TP INR4928, 16% Upside, Buy)
- Muted volume growth: Ultratech Cements’ (UTCEM) 4QFY17 revenue increased 3% YoY to INR65.95b (est. of INR63.92b). Grey cement volumes were flat YoY at 13.68mt, with capacity utilization of the group in excess of 81%.
- Margin beat led by strong cost control: Blended realization fell 2% QoQ to INR4689/t due to weak white cement realizations. Grey cement realizations were flat QoQ due to strong price hikes in Feb/March-17. However, strong control over key costs like power & fuel (P&F) and freight helped mitigate the impact of rising input costs (unitary cost -1% QoQ to 3,780/t). Cost measures were mainly toward power, resulting in lower P&F cost. Also, freight cost rise was restricted by the ramp-up of grinding units. EBITDA thus fell 7% YoY to INR12.78b (est. of INR10.6b; reported EBITDA was much higher than estimate as it includes other operating income), translating into EBITDA/ton of INR921 (-INR42/t QoQ; -INR56/t YoY) and margin of 19.4% (-2.1pp YoY; -0.5pp QoQ).
- FY17 performance: Grey cement volumes grew at a muted 2% YoY to 48.8mt due to weak volumes in 2HFY17. Revenues rose 1% YoY to INR238b as blended realizations were lower by 1% YoY. Blended EBITDA/t stood at INR1,004 (+6% YoY), led by cost savings (cost/t down 2% QoQ to INR3,822). Hence, EBITDA rose by 7% YoY to INR49.7b and PAT by 11% YoY to INR26.37b.
UltraTech Cement Limited is engaged in the business of cement and cement-related products. The Company manufactures a range of products that cater to construction needs from foundation to finish, including Ordinary Portland Cement (OPC), Portland Blast Furnace Slag Cement (PSC), Portland Pozzolana Cement (PPC), white cement and white cement-based products, ready mix concrete, including specialty concrete, building products, such as aerated autoclaved concrete (AAC) blocks and joining mortars and a host of others in retail formats. Its geographical segments include India and Rest of the World. The Company focuses on various areas, including alternative fuels, waste heat recovery systems, carbon dioxide emission reduction, waste management, water re-cycling and bio-diversity management. It has over 10 integrated cement units, approximately 10 grinding units, a white cement unit, a wall care putty, over five bulk terminals and over 100 ready mix concrete units.
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Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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