Cement July 22, 2014 UltraTech Bloomberg: UTCEM IN Reuters: UTCEM.BO BUY Institutional Equities India Research RESULT REVIEW Recommendation CMP: Rs2,528 Target Price: Rs2,837 Previous Target Price Rs2,837 Upside (%) 12% Stock Information Market Cap. (Rs bn / US$ mn) 692/11,478 52-week High/Low (Rs) 2,872/1,402 3m ADV (Rs mn /US$ mn) 967/16 Beta 1.1 Sensex/ Nifty 25,715/7,684 Share outstanding (mn) 274 Stock Performance (%) 1M 3M 12M YTD Absolute (7.5) 13.7 30.7 43.0 Rel. to Sensex (9.7) 0.6 2.4 17.7 Performance Source: Bloomberg Earnings Revision (%) (%) FY15E. FY16E. FY17E. Sales 4.2. 7.3 7.3 EBITDA 3.5. 6.0 6.8 PAT 4.6. 1.1 2.9 Source: Karvy Institutional Research Analysts Contact Rajesh Kumar Ravi 022 6184 4313 [email protected]1,550 2,050 2,550 3,050 15,500 17,500 19,500 21,500 23,500 25,500 27,500 Jul-13 Sep-13 Oct-13 Nov-13 Dec-13 Feb-14 Mar-14 Apr-14 Jun-14 Jul-14 Sensex (LHS) Ultartech Cement (RHS) Strong Volume Growth Drives Profitability UltraTech’s standalone 1QFY15 net Sales rose 14% YoY to Rs59.6 bn while EBITDA & PAT declined 2% & 7% YoY respectively to Rs10.5 bn and Rs6.3 bn respectively. On QoQ basis, Sales, EBITDA & PAT declined 5%, 17% and 16%. EBITDA per MT at Rs879 is down 15% YoY & 14% QoQ. Strong volume growth drives profitability: Its net sales realization (NSR) declined 1% YoY (flat QoQ) vs our estimate of 1.7% QoQ higher NSR. However, its sales volume (+15% YoY & -4% QoQ) came in 2% ahead of our estimates on account of amalgamation of JP Gujarat operational performance during the quarter. Subsequently, net sales came in-line with our estimates. Double digit volume growth came at slightly lower NSR growth. Operating costs per MT rose 3.6% QoQ and 3% YoY (vs our estimates of 2% QoQ increase) driven primarily by higher fixed costs per MT which rose 10% QoQ. Input costs per MT rose a modest 1.5% QoQ on stable fuel costs and INR appreciation. Subsequently, EBITDA declined 2% YoY and 17% QoQ to Rs10.5 bn – 12% lower than our estimates led primarily by lower NSR. PAT declined 7% YoY and 16% QoQ to Rs6.3 bn (our estimate Rs7.1 bn). Re-iterate “BUY”: We have amalgamated the JP Gujarat (4.8 mn MT) financials in UltraTech wef FY15E. Subsequently, we increase our FY15E/16E/17E EBITDA estimates by 3.5%, 6%, 6.8% respectively. Our FY15E upgrade is lower as we have adjusted the financials for lower than estimated 1QFY15 performance. On account of higher capital charges on amalgamation of JP Gujarat unit, we cut our FY15E/16E PAT estimates by 4.6% & 1.1% respectively and increase FY17E PAT by 3%. We expect UltraTech to deliver 29% EBITDA and PAT CAGRs during FY14-17E period led by 13% volume growth. UltraTech has 80% CPP capability on its current capacity of 59 mnMT (India). The capacity will increase to 65 mn MT by end of FY15E. We re-iterate our “BUY” recommendation with a TP of Rs2837 (no change) valuing it at 11.5x its FY16E EBITDA. The TP discounts FY17E EBITDA at 8.9x and implies replacement cost valuations of USD194/187 on FY16E/17E basis. Financial Summary (Standalone) Year to March (Rs mn) FY13 FY14 FY15E FY16E FY17E Net Revenues 201,800 202,798 248,206 297,118 341,849 EBITDA 46,755 38,179 51,165 66,952 82,364 EBITDA margin (%) 23.2 18.8 20.6 22.5 24.1 Net profit 26,555 20,489 25,958 34,766 44,263 EPS (Rs) 96.9 74.7 94.6 126.7 161.3 RoE (%) 18.9 18.2 14.2 16.6 18.1 RoCE (%) 19.4 13.0 15.4 18.0 21.0 P/E (x) 26.0 33.8 26.7 19.9 15.6 EV/EBITDA (x) 14.2 17.6 13.9 10.2 7.8 Source: Company, Karvy Institutional Research
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Cement July 22, 2014
UltraTech
Bloomberg: UTCEM IN Reuters: UTCEM.BO
BUY
Institutional Equities
India Research
RESULT REVIEW
Recommendation
CMP: Rs2,528
Target Price: Rs2,837
Previous Target Price Rs2,837
Upside (%) 12%
Stock Information Market Cap. (Rs bn / US$ mn) 692/11,478
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