MOSL: ULTRATECH CEMENT (Buy): Margin outlook continues to improve
ULTRATECH CEMENT: Margin outlook continues to improve
(UTCEM IN, Mkt Cap USD28.9b, CMP INR7460, TP INR8770, 18% Upside, Buy)
Expansions provide strong growth visibility
- UltraTech Cement (UTCEM) continued to improve its costs and margins in 1QFY22; it reported the highest ever EBITDA/unit of INR1,536/t (+8% YoY) during the quarter. Coupled with volume growth of 47% YoY, this led to 59% YoY growth in EBITDA. Net debt fell INR7b QoQ to INR59.8b (0.44x TTM EBITDA).
- Market share gains should continue, aided by the ongoing 20mtpa expansion program, which should drive a 13% volume CAGR over FY21–24E.
- We raise our EPS for FY22E/FY23E by 6%/6%, factoring in a better realization outlook. We estimate a 26% EPS CAGR over FY21–23E.
Better realization and lower cost inflation drive 9% beat on EBITDA
- Consolidated revenue / EBITDA / Adjusted PAT rose 54%/59%/92% YoY to INR118.3b/INR33.1b/INR17.0b and was -1%/+9%/+9% against our estimate.
- Consolidated volumes rose 47% YoY to 21.53mt (v/s our expectation of 22.1mt), with India volumes up 47% YoY. EBITDA/t at INR1,536/t (+8% YoY, +16% QoQ) surprised positively v/s our estimate of INR1,368/t.
- Blended realization rose 5% YoY to INR5,495/t (+6% QoQ; est. 5,401/t). On the other hand, cost inflation was lower than expected at 3.7% YoY to INR3,958/t (v/s our estimate of INR4,033/t). Freight and fuel cost inflation was low despite the surge in diesel and petcoke prices.
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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