UltraTech Cement reported strong growth in net sales and profits for the fourth quarter of FY2012 compared to the same period last year. Net sales were up 18.9% due to a 10% rise in realizations and 8% increase in volumes. Operating profit margin expanded by 318 basis points to 24.5% despite cost pressures. The company exceeded analysts' estimates due to lower operating costs. While input costs rose, UltraTech managed to control freight and fuel costs. The brokerage remains neutral on the stock and expects mid-teen revenue and profit growth over the next two years.
UltraTech Cement reported strong growth in net sales and profits for the fourth quarter of FY2012 compared to the same period last year. Net sales were up 18.9% due to a 10% rise in realizations and 8% increase in volumes. Operating profit margin expanded by 318 basis points to 24.5% despite cost pressures. The company exceeded analysts' estimates due to lower operating costs. While input costs rose, UltraTech managed to control freight and fuel costs. The brokerage remains neutral on the stock and expects mid-teen revenue and profit growth over the next two years.
UltraTech Cement reported strong growth in net sales and profits for the fourth quarter of FY2012 compared to the same period last year. Net sales were up 18.9% due to a 10% rise in realizations and 8% increase in volumes. Operating profit margin expanded by 318 basis points to 24.5% despite cost pressures. The company exceeded analysts' estimates due to lower operating costs. While input costs rose, UltraTech managed to control freight and fuel costs. The brokerage remains neutral on the stock and expects mid-teen revenue and profit growth over the next two years.
UltraTech Cement reported strong growth in net sales and profits for the fourth quarter of FY2012 compared to the same period last year. Net sales were up 18.9% due to a 10% rise in realizations and 8% increase in volumes. Operating profit margin expanded by 318 basis points to 24.5% despite cost pressures. The company exceeded analysts' estimates due to lower operating costs. While input costs rose, UltraTech managed to control freight and fuel costs. The brokerage remains neutral on the stock and expects mid-teen revenue and profit growth over the next two years.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online from Scribd
Download as pdf or txt
You are on page 1/ 10
4QFY2012 Result Update | Cement
April 24, 2012
UltraTech Performance Highlights Y/E March (` cr) Net sales Operating profit OPM (%) Net profit 4QFY2012 5,337 1,319 24.5 867
Investment Period Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
During 4QFY2012, UltraTech Cement (ULTC) posted strong 19.3% yoy growth in its bottom line on account of substantial 10.0% yoy growth (up 2.5% sequentially) in blended realization. Volumes (incl. clinker and white cement) rose by 8.1% yoy to 11.81mn tonnes. The companys results were well ahead of ours as well as streets estimates, primarily on account of a 1% qoq decline in its per tonne operating costs (`3,448/tonne). Per tonne freight costs rose only by 1.6% qoq, despite the substantial increase in railway freight charges (base freight charges increased by 22% w.e.f. March 6, 2012). Similarly power and fuel costs per tonne declined by 6.6% on a qoq basis, even though coal costs were down only marginally during the quarter. We remain Neutral on the stock. OPM up by 318bp yoy: During 4QFY2012, ULTCs net sales grew by 18.9% yoy to `5,337cr, on account of 10% yoy growth in volumes and 8% yoy growth in realization. The companys blended realization improved by 10% yoy to `4,519/tonne. Strong improvement in realization offset the 8.6% yoy growth in per tonne operating costs due to which OPM rose by 318bp yoy to 24.5%. Outlook and valuation: We expect ULTC to post an 11.2% and 8.3% CAGR in its top line and bottom line over FY2012-14, respectively. At current levels, the stock is trading at EV/tonne of US$124 on FY2013 estimates, which we believe is fair. Further, ongoing investigation by Competition Commission of India regarding cartelization by cement companies and its potential negative outcome are overhangs on the stock. We continue to remain Neutral on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.3 5.5 19.1 12.2
Abs. (%) Sensex UTCEM
3m 1.2 16.1
1yr (12.2)
3yr 51.9
39.6 149.6
Key financials (Standalone)
Y/E March (` cr) Net sales % chg Net profit % chg FDEPS (`) OPM (%) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/Tonne (US $) EV/EBITDA (x) Source: Company, Angel research
Please refer to important disclosures at the end of this report
UltraTech Cement | 4QFY2012 Result Update
Exhibit 1: 4QFY2012 performance (Standalone)
Y/E March (` cr) Net Sales Other operating Income Total Operating Income Net raw-material costs (% of sales) Power & fuel (% of sales) Staff costs (% of sales) Freight & forwarding (% of sales) Other expenses (% of sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) PBT Provision for Taxation (% of PBT) Reported PAT PATM (%) EPS (`) Source: Company, Angel Research
(` cr) Net sales Operating profit Net profit Source: Company, Angel Research
Actual 5,337 1,319 867
Estimates 5,176 1,026 551
Variation (%) 3.1 28.6 57.3
Performance highlights Net sales up 16.8% yoy, aided by higher volume realizations During 4QFY2012, ULTCs net sales rose by 18.9% yoy on account of higher volumes and better realization. During the quarter, realization improved by 10.0% yoy to `4,519/tonne. The companys volumes (incl. clinker and white cement) stood at 11.8mn tonnes, up 8% yoy, in 4QFY2012. ULTCs volume growth was lower than all-India dispatches growth of 9.5% for 4QFY2012. Strong improvement in all-India dispatches was on account of pick-up in cement demand all across the country (including the southern region, which has remained a laggard over the past several quarters). UltraTech, a pan-India player with a substantial presence in the southern region, benefitted from the pick-up in demand in the region. During the quarter, realization was also higher by 10% yoy and 2.5% qoq, respectively. Cement manufacturers had resorted to price increases during the quarter to capitalize on demand pick-up and due to the hike in freight rates carried out by the railways and increase in excise duty announced in the Union Budget.
Strong realization results in OPM expansion, despite cost pressures
During the quarter, while the cost of domestic coal was higher on a yoy basis due to price hike carried out by Coal India in February 2011, imported coal costs were marginally lower by 2.2% yoy (1.8% qoq).
Per tonne analysis
During 4QFY2012, ULTCs blended realization per tonne rose by 10.0% yoy to `4,519. Raw-material cost per tonne increased by 13.7% yoy. P&F cost per tonne rose by 14.1% yoy on account of increased coal prices. Freight cost/per tonne rose by 22.8% yoy. The companys operating profit/tonne increased by 14.6% yoy to `1,070 during the quarter.
April 24, 2012
UltraTech Cement | 4QFY2012 Result Update
Exhibit 4: Operational performance
Particulars (`) Realization/tonne Raw-material cost/tonne P&F cost /tonne Freight cost/tonne Other costs Operating costs Operating profit/tonne Source: Company, Angel Research
Investment arguments Indias largest cement manufacturer: Post the merger of Samruddhi (erstwhile cement division of Grasim) with itself, ULTC is now Indias largest cement player with a pan-India presence. The company has also acquired a controlling stake in Dubai-based ETA Star. ETA Stars manufacturing facilities include a 2.3mtpa clinkerization plant and a 2.1mtpa grinding capacity in UAE, and 0.4mtpa and 0.5mtpa grinding facilities in Bahrain and Bangladesh, respectively. In addition, ULTC has a capital outlay of `11,000cr to be spent over setting up additional clinkerization plants at Chattisgarh and Karnataka along with grinding units and bulk packaging terminals across various states. Post these expansions, the companys total capacity is expected to increase by 10.2mtpa, which is expected to be operational by FY2014. Pan-India presence to insulate ULTC from price volatility: ULTC has been enjoying good brand equity, which has only strengthened post Samruddhis merger along with being insulated from the wide variations in regional demand and price volatility. Post the merger, ULTC has been enjoying synergic benefits by way of superior operating efficiencies due to its larger size. Increased use of captive power to protect margins: Currently, ULTC has 504MW of power capacity. The company is planning to expand its capacity by 70MW. Increased use of captive power for its overall power requirements would help the company to maintain healthy operating margins. Outlook and valuation: We expect ULTC to post an 11.2% and 8.3% CAGR in its top line and bottom line over FY2012-14. At current levels, the stock is trading at EV/tonne of US$124 on FY2013 estimates, which we believe is fair. Further, ongoing investigation by Competition Commission of India regarding cartelization by cement companies and its potential negative outcome are overhangs on the stock. We continue to remain Neutral on the stock.
April 24, 2012
UltraTech Cement | 4QFY2012 Result Update
Exhibit 5: Change in estimates
(` cr) Earlier Net sales Operating exp. Operating profit Depreciation PBT Tax PAT Source: Angel Research 19,889 15,878 4,238 919 3,213 964 2,249
DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
UltraTech Cement No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
