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UltraTech Cement, the country’s largest cement producer, surprised analysts on Wednesday with its volume growth and profit after tax (PAT). While the Street was expecting an uptick in volumes, thanks to a spike in demand in North India, volume growth of nine per cent in cement and clinker sales has come as a surprise. Revenues for the quarter grew 8.17 per cent year-on-year (y-o-y) to Rs 5,832 crore. For the full year, however, the company’s sales remained flat and PAT declined 19.26 per cent.
The company has reported robust volume growth during the quarter for cement, clinker, white cement and wall putty. Analysts say while the grey cement volume growth is largely in line with the market’s estimates, the volume growth of nine per cent in cement and clinker has largely come from clinker sales during the fourth quarter.
The gains from higher volumes and lower raw material costs have flowed into the bottom line. UltraTech also surprised on the bottom line front, which grew 13 per cent y-o-y to Rs 838 crore. The Street was expecting the company to report a net profit of Rs 610 crore. The firm has also got an additional gain of Rs 95.6 crore during the quarter, driven by a tax reversal from earlier quarters. Lower raw material and power costs also aided the company during the quarter.
Despite the positive numbers in the fourth quarter, the stock is not on the ‘buy’ list of brokerages, as valuations remain very expensive. For one, an enterprise value per tonne of $165 is considered to be very expensive. Also, at Rs 2,170, the stock is factoring in Ebitda per tonne of Rs 1,350, which implies a volume growth of over eight per cent in FY15 and FY16. Given UltraTech has exited FY14 with an Ebitda/tonne of Rs 910, it is unlikely it will be able to grow volumes at eight per cent and expand operating profit by such a wide margin.
