MOSL: ULTRATECH CEMENT (Buy)-Volumes healthy, but cost push dent margins
Ultratech Cement: Volumes healthy, but cost push dent margins
(UTCEM IN, Mkt Cap USD14.6b, CMP INR3790, TP INR4368, 15% Upside, Buy)
- Volume growth healthy: Volumes grew 13% YoY to 17.9mt (our estimate: 17.19mt) in 3QFY19. Realizations declined 1% QoQ to INR4,923/t (our estimate: INR4,998) as higher prices in north were offset by weaker prices in south and east. Net sales grew 18% YoY (+12% QoQ) to INR88b (our estimate: INR85.9b).
- Cost push impact margins: Cost/t increased 6%YoY led by higher Power and fuel cost/t. Thus, EBITDA/t declined 3% YoY to INR777 (our estimate: INR881). EBITDA increased 10% YoY (+8% QoQ) to INR13.9b (our estimate: INR15.1b), with the margin contracting -1.2pp YoY (-0.7pp QoQ) to 15.8%. Adj. PAT was up 41% YoY at INR4.4b (our estimate: INR5.3b), as 3QFY18 had reversal of provision amounting INR10.4b toward DMF for earlier years accounted in other income.
- 9MFY19 performance: Volumes grew 21% YoY. Sales/EBITDA grew 22.5%/3% YoY, while PAT declined 12.3% YoY. For 4QFY19, we expect volumes/sales/EBITDA to grow 7%/8.6%/1.7% YoY and PAT to fall 4% YoY.
- Management commentary: (1) Industry grew by 9-10% YoY in 3QFY19, while all-India utilization stood at 70%. Construction ban in the NCR region and festive season led to moderation in demand. (2) Prices dropped by 2-3% in south and by 1-2% in east during the quarter.
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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