MOSL: ULTRATECH CEMENT (Buy)-Revival of Century assets to support earnings growth
ULTRATECH CEMENT: Revival of Century assets to support earnings growth
(UTCEM IN, Mkt Cap USD17.2b, CMP INR4234, TP INR5050, 19% Upside, Buy)
UltraTech Cement (UTCEM) has underperformed the Sensex by 10% over the past three months due to weak cement demand and the dismal performance of the acquired Century Cement assets in 2QFY20. In this note, we present (a) the premise for our expectation of an improvement in profitability of Century and (b) the case studies on the turnaround of the other two acquisitions – JPA and Binani. With limited capex needs going forward, strong FCF generation (~7% yield) will likely drive deleveraging and 550bps improvement in RoE over the next two years. Against this promising backdrop, we maintain our positive stance on UTCEM – our top pick in the sector.
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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