 "UltraTech: Strong show, weak realisations")
The highlight of UltraTech’s performance for the March quarter was profit growth topping expectations. The growth was led by increase in volumes and lower costs. Sales volumes at 13.2 million tonnes (mt) grew 15 per cent year-on-year (y-o-y) ahead of analysts’ estimates of 10 per cent, and partly compensated for softer realisations.
Average realisations (blended cement and concrete) at Rs 4,609 a tonne marked a nine per cent y-o-y decline, and restricted profit growth.
Analysts such as Binod Modi at Reliance Securities had estimated domestic cement realisations at Rs 4,348 a tonne, whereas the actual came at Rs 4,244 a tonne. Soft realisations hit sales. Consolidated sales at Rs 6,850 crore were about a per cent lower than Bloomberg consensus estimates of Rs 6,933 crore. Thus, realisations were the only disappointment but more importantly, the trend might not continue in subsequent quarters.
The company’s performance at the operating level has been excellent. Total cost per tonne at Rs 3,689 declined eight per cent y-o-y led by declining energy costs. At Rs 685 a tonne, energy costs were 27 per cent lower y-o-y, partly helped by the improvement in efficiency. The consumption of cheaper pet coke increased six per cent, pushing up its share in energy costs to 70 per cent. This, along with soft coal prices, helped reduce energy costs. Thus, UltraTech’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) at Rs 1,478 crore was much better than consensus estimate of Rs 1,261 crore. Ebitda per tonne at Rs 945 also improved from Rs 900 seen in the December 2015 quarter. Consequently, net profit at Rs 722 crore (up 10 per cent y-o-y) came ahead of Rs 686 crore indicated by Bloomberg consensus.
Thus, despite the recent gains, UltraTech’s stock ended in the green at Rs 3,278 even as the Sensex was down 0.6 per cent on Monday. Even now, most analysts are positive on the company.
Siddharth Purohit at Angel Broking says cement prices started picking up from March and the real impact will be visible in the coming quarters. Prohit says earnings could improve in FY17. Modi says he continues to maintain a positive stance considering the revival of capex cycle and easing of over-supply concerns.
Average realisations (blended cement and concrete) at Rs 4,609 a tonne marked a nine per cent y-o-y decline, and restricted profit growth.
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Analysts such as Binod Modi at Reliance Securities had estimated domestic cement realisations at Rs 4,348 a tonne, whereas the actual came at Rs 4,244 a tonne. Soft realisations hit sales. Consolidated sales at Rs 6,850 crore were about a per cent lower than Bloomberg consensus estimates of Rs 6,933 crore. Thus, realisations were the only disappointment but more importantly, the trend might not continue in subsequent quarters.
The company’s performance at the operating level has been excellent. Total cost per tonne at Rs 3,689 declined eight per cent y-o-y led by declining energy costs. At Rs 685 a tonne, energy costs were 27 per cent lower y-o-y, partly helped by the improvement in efficiency. The consumption of cheaper pet coke increased six per cent, pushing up its share in energy costs to 70 per cent. This, along with soft coal prices, helped reduce energy costs. Thus, UltraTech’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) at Rs 1,478 crore was much better than consensus estimate of Rs 1,261 crore. Ebitda per tonne at Rs 945 also improved from Rs 900 seen in the December 2015 quarter. Consequently, net profit at Rs 722 crore (up 10 per cent y-o-y) came ahead of Rs 686 crore indicated by Bloomberg consensus.
Thus, despite the recent gains, UltraTech’s stock ended in the green at Rs 3,278 even as the Sensex was down 0.6 per cent on Monday. Even now, most analysts are positive on the company.
Siddharth Purohit at Angel Broking says cement prices started picking up from March and the real impact will be visible in the coming quarters. Prohit says earnings could improve in FY17. Modi says he continues to maintain a positive stance considering the revival of capex cycle and easing of over-supply concerns.