 "UltraTech Cement: Good show in a subdued quarter")
In an otherwise soft December quarter, when cement demand and realisations remained subdued, UltraTech’s performance, though lower than the Bloomberg consensus estimates, was satisfactory. The demand remained affected due to festival season in October and November, and saw recovery in December. However, the company still managed to post sales volumes of 10.9 million tonnes (mt), higher than 9.98 mt a year ago and 10.35 mt in the September quarter.
UltraTech posted 15 per cent year-on-year (y-o-y) growth in standalone net sales at Rs 5,489 crore, a bit lower than the Bloomberg consensus estimate of Rs 5,569 crore. The figures, however, are not strictly comparable looking at the acquisition of JP group's Gujarat units in the June quarter. The 10 per cent y-o-y rise in volumes suggests the rest of revenue growth came from higher realisations. Piyush Jain of Morningstar India says realisations were up 7.7 per cent y-o-y.
Although cost pressures remained, it was moderate compared to the brisk rise seen in previous quarters. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) at Rs 957.33 crore was higher than the Rs 930 crore estimates. Ebitda per tonne was Rs 770 versus Rs 743 a year ago.
In the medium term, analysts believe prospects of cement players will get better. India Ratings & Research has revised its cement sector outlook for FY16 to 'stable', from 'negative' a year ago, on expectation that demand growth (6.5-8 per cent) would outpace supply additions (6.7 per cent) in the next financial year. They expect capacity utilisations to improve from 71 per cent in FY14 to 73-75 per cent in FY16.
Cement players have also taken price rises in January. While prices in the North and West, corrected in October-November, have regained lost ground, those in South India have improved by Rs 40 a bag.
The board has also approved acquisition of the JP group’s 4.9 mt per annum cement and clinker capacities in Madhya Pradesh, which will boost its presence in central India. The company, thus, will see its capacities rising to 65 mtpa after the completion of acquisition, 71 mtpa by FY16, compared with 60.2 mtpa at the end of September quarter.
However, the short term is not very rosy. The stock has already gained 24 per cent in a month to Rs 3,143 after the announcement of acquisition and on the back of price rises. The management, too, says the business outlook is challenging, while pegging long-term demand growth at eight per cent. Given the run-up and rich valuations, analysts feel the stock factors in most positives pointing to the Bloomberg consensus price of Rs 2,824.
UltraTech posted 15 per cent year-on-year (y-o-y) growth in standalone net sales at Rs 5,489 crore, a bit lower than the Bloomberg consensus estimate of Rs 5,569 crore. The figures, however, are not strictly comparable looking at the acquisition of JP group's Gujarat units in the June quarter. The 10 per cent y-o-y rise in volumes suggests the rest of revenue growth came from higher realisations. Piyush Jain of Morningstar India says realisations were up 7.7 per cent y-o-y.
Although cost pressures remained, it was moderate compared to the brisk rise seen in previous quarters. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) at Rs 957.33 crore was higher than the Rs 930 crore estimates. Ebitda per tonne was Rs 770 versus Rs 743 a year ago.
In the medium term, analysts believe prospects of cement players will get better. India Ratings & Research has revised its cement sector outlook for FY16 to 'stable', from 'negative' a year ago, on expectation that demand growth (6.5-8 per cent) would outpace supply additions (6.7 per cent) in the next financial year. They expect capacity utilisations to improve from 71 per cent in FY14 to 73-75 per cent in FY16.
Cement players have also taken price rises in January. While prices in the North and West, corrected in October-November, have regained lost ground, those in South India have improved by Rs 40 a bag.
The board has also approved acquisition of the JP group’s 4.9 mt per annum cement and clinker capacities in Madhya Pradesh, which will boost its presence in central India. The company, thus, will see its capacities rising to 65 mtpa after the completion of acquisition, 71 mtpa by FY16, compared with 60.2 mtpa at the end of September quarter.
However, the short term is not very rosy. The stock has already gained 24 per cent in a month to Rs 3,143 after the announcement of acquisition and on the back of price rises. The management, too, says the business outlook is challenging, while pegging long-term demand growth at eight per cent. Given the run-up and rich valuations, analysts feel the stock factors in most positives pointing to the Bloomberg consensus price of Rs 2,824.