Also, operating profit margins came off by 230 basis points to just short of 30 per cent because of higher coal prices, which have risen 100 per cent over the past year. Even on a sequential basis, operating profit margins were lower because of the fall in volumes. UltraTech will continue to see cost pressure with the impact of higher fuel prices kicking in from the current quarter.
The management has expressed concerns about demand slowing down, which could put pressure on cement prices. Prices have been recently raised by Rs. 2-3 per bag across regions.
Also, industry watchers point out that at least 15 million tonnes of fresh capacity is expected to go on stream by March 2009, a factor that could lead to excess supply. What's worrying is that demand from the housing sector, which accounts for about half the total demand, could slacken as real estate companies go slow on projects.
The company's revenues are estimated to grow by about 7-8 per cent in the current year. The earnings per share (eps), which stood at Rs 81 in FY08, is expected to fall in the current year before recovering in FY10.
At the current price of Rs 539, the stock trades at 9.4 times its estimated FY09 earnings