MOSL: ULTRATECH CEMENT (Buy)-Volumes below estimate, cost push impacts margins
Ultratech Cement: Volumes below estimate, cost push impacts margins
(UTCEM IN, Mkt Cap USD13.5b, CMP INR3609, TP INR4157, 15% Upside, Buy)
- Volumes, sales come in below estimates: UTCEM’s volumes grew 20% YoY to 15.8mt (our estimate: 16.7mt) in 2QFY19. Realizations increased 1.4% QoQ to INR5,015/t (in-line) due to higher prices in the central, north and southern markets. Net sales grew 21% YoY (-8% QoQ) to INR79b (our estimate: INR83.7b).
- Cost push affects margins: Cost/t was up 4% QoQ, led by an increase in power & fuel cost/t and other expenses/t. EBITDA/t, thus, declined 12% QoQ to INR818 (our estimate: INR871). Consequently, EBITDA declined by 20% QoQ (-4% YoY) to INR12.9b (our estimate: INR14.5b), with the margin contracting 2.4pp QoQ (-4.2pp YoY) to 16.3%. PAT was down 9.4% YoY to INR3.9b (our estimate: INR5.2b).
- Half-yearly performance: Volumes grew 26.5% YoY in 1HFY19, resulting in Sales, EBITDA and PAT growth of 25.6% YoY, 0%YoY and -25%YoY respectively. We expect volumes to increase 10.6% YoY in 2HFY19. Sales, EBITDA and PAT are expected to grow by 14% YoY, 11.5% YoY and 25% YoY for the second half of the fiscal year.
- Management commentary: (1) The company completed commissioning of two 13MW WHRS in 2QFY19, achieving total WHRS capacity of 85MW. (2) The industry should witness new capacity addition of 15-17mtpa and demand growth of 25-27mtpa. (3) Industry demand grew by 10-11% in 2QFY19, while utilization stood at 65%.
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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