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UltraTech Cement 2QFY2013 performance highlights and results update

Contributed by Angel Broking

During 2QFY2013, UltraTech Cement (ULTC) posted a strong 97.2% yoy growth in its bottom-line, which was in-line with our estimate. The robust performance was on account of a substantial 20.2% yoy growth (up 1.9% sequentially) in blended realization. However, the company faced margin pressures due to the increase in raw material and freight costs. We remain Neutral on the stock.

OPM up by 551bp yoy: During 2QFY2013, ULTC's net sales grew by 20.2% yoy to 74,700cr, largely on account of better realization. The company's realization rose 20.2% yoy and 1.9% qoq to '5,005/tonne. The improvement in realization led the OPM to rise by 551bp yoy to 21.9%. The company's operating cost per tonne too rose by 10.9% yoy and 7.4% qoq to '3,932/tonne. The raw material cost per tonne rose by 22.1% yoy and 9.1% qoq to '763. The freight cost per tonne rose by 24.2% yoy due to increase in diesel costs and hike in railway fare. The power and fuel (P&F) cost per tonne too rose by 12.5% on a yoy basis. The steep decline in INR vs USD partly negated the fall in global coal prices, resulting in higher power and fuel costs.

Outlook and valuation: We expect ULTC to post a 14.6% and 16.6% CAGR in its top-line and bottom-line over FY2012-14, respectively. At the current levels, the stock is trading at an EV/tonne of US$1 78 on FY2014 capacity, which we believe is fair. We continue to remain Neutral on the stock.