MOSL: ULTRATECH CEMENT (Buy)- Strong growth visibility; higher costs a near-term concern
ULTRATECH CEMENT: Strong growth visibility; higher costs a near-term concern
(UTCEM IN, Mkt Cap USD28.3b, CMP INR7398, TP INR8700, 18% Upside, Buy)
Cost inflation impacts margin
- UTCEM reported an 8%/7% YoY growth in volume/blended realization. EBITDA margin declined by 339bp YoY to 22.6% due to energy cost inflation, which was further accentuated by higher maintenance and employee costs. EBITDA remained largely flat YoY at INR27.1b (-18% QoQ).
- Market share gains should continue, aided by the ongoing 20mtpa expansion program (1.2mtpa commissioned in Oct'21), which should drive a 10% volume CAGR over FY21-24E.
- We largely maintain our FY22-24E EPS estimates and expect 19% EPS CAGR over FY21-24E.
Margin misses our estimate by 222bp despite higher realization/other operating income
- Consolidated revenue/EBITDA/adjusted PAT rose 16%/1%/8% YoY to INR120.2b/INR27.1b/INR13.1b and was +4%/-5%/-13% against our estimate.
- Consolidated volumes rose 8% YoY to 21.64mt (v/s our expectation of 21.41mt), with India volumes up 8% YoY.
- EBITDA margin missed our estimate by 222bp and stood at 22.6% (-339bp YoY; -537bp QoQ) on the back of higher energy (increase in petcoke/coal prices), employee (increments were effective from 2QFY22), and other costs (due to annual plant maintenance).
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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