MOSL: ULTRATECH CEMENT (Buy)-Below estimates-revival of CTIL’s plants to remain key
ULTRATECH CEMENT: Below estimates; revival of CTIL’s plants to remain key
(UTCEM IN, Mkt Cap USD16.6b, CMP INR4296, TP INR4950, 15% Upside, Buy)
- Volumes decline, realizations decrease sequentially: 2QFY20 consolidated volumes (including white cement) declined 1% YoY to 18.7mt. Realizations decreased 3% QoQ due to weaker prices in the southern and eastern regions of India. Net sales grew 4% YoY to INR96b. Cost/t declined 1% YoY to INR 4,121/t. Thus, EBITDA/t rose 36% YoY to INR1,026/t (-25% QoQ). While EBITDA grew 35% YoY to INR19b, margin expanded 4.6pp YoY to 19.9%. PAT stood at INR5.8b (+62% YoY).
- Ex Century, EBITDA in line: Excluding Century, volumes increased 3% YoY (in-line). Realizations increased 5% YoY (-3% QoQ) to INR5,163 and net sales grew 7% YoY to INR88.6b (in-line). Cost/t declined 3% YoY but increased 3% QoQ due to higher other expenses/t. EBITDA/t increased 42% YoY (down 22% QoQ) to INR 1,132/t (below est. of INR1,188/t due to higher other expenses). EBITDA stood at INR19.2b (v/s est. of INR20b).
- Management commentary: (1) All India demand reduced by 2-2.5% YoY in 2QFY20 led by 3-4% decline in the South/East. (2) The board has approved 3.4mt capacity expansion in the East through two brownfield expansions (Patliputra in Bihar and Dankuni in West Bengal) and a greenfield grinding unit in Odisha. (3) Century's cement assets operated at 48% utilization in 2QFY20 and generated nil EBITDA (INR60/t incl. other income). Utilization for 2QFY19 stood at 64% with EBITDA/t of INR500/t. The reduction in utilization was due to maintenance shutdown taken for the plants in 2QFY20. (4) Net debt reduced by INR15b over Mar-Sep'19.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
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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