Result-Analysis-Elite-Wealth

Result-Analysis

Result Analysis: Ultratech Cement Ltd. Result Update Q2FY22

 

Particulars (In ₹. Cr) Q2FY22 Q1FY21 Q2FY21 QoQ % YoY%
Revenue From Operation 12016 11830 10387 1.57% 15.68%
Other Income 140 204 135 -31.37% 3.70%
Total Income 12156 12034 10522 1.01% 15.53%
Cost Of material Consumed 1731 1550 1350 11.68% 28.22%
Other Expenses 8478 7958 7374 6.53% 14.97%
Material Cost as percentage of revenue 14.41% 13.10% 13.00% 9.95% 10.84%
EBITDA 2855 3,511 2833 -18.68% 0.78%
EBITDA Margin 23.49% 29.18% 26.92% -19.50% -12.77%
Profit After Tax 1,313 1,702 1,167 -22.86% 12.51%
PATM (%) 10.80% 14.14% 11.09% -23.63% -2.61%
Basic EPS (in Rs. ) 45.54 59.02 40.44 -22.84% 12.61%

 

Segment Revenue Q2FY22 Q1FY21 QoQ %
Grey Cement 9,884 10,185 -2.96%
RMC 614 509 20.63%
White Cement 505 362 39.50%
Grey Cement (overseas) 501 445 12.58%

Result Highlight:

  • Revenue from operation rose by57% QoQ and 15.68% YoY to ₹ 12016 crore. Other income decline 31.37 % QoQ to ₹ 140 Crore.

  • Material cost formed 14.41%of total sale, cost of material rises 28.22% YoY.

  • EBITDA came in at ₹ 2855 compared to ₹ 2833 Y-o-Y and EBITDA margin at 23.49%

  • Net profit rose 12.51% YoY to ₹1313 crore for the September quarter compared with ₹ 1167 crore in the same quarter last

  • Premium Product volume increase 14% YoY, grey cement volume increase by 8% YoY.

  • Logistic Cost formed 31% of the total cost and increased 7% YoY to ₹1219 per tonne.

  • Energy cost increased by 17% to ₹ 1099 per tonne, this rise is due to steep rise in coal and petcock prices.

  • Net debt of the company has fallen to ₹ 6336 crore and net debt / EBITDA to 0.47. Net Debt : EBITDA reduced to 0.47x from the peak of

  • 55x after UNCL and Century acquisitions during FY19

  • ROCE of the company improved from 15.3% to 17.3%.

  • ROE improved to 16.5% from 15.6%.

Management commentary: 

  • Cement prices are back to pre-monsoon levels; margins are still affected due to the increased operational costs. More price increases will happen as demand is robust..

  • All 4000-5000 crores of Capex in FY21 will be funded by internal accruals while they are going to pay off more debt.

  • Ultratech is there concall said they are market leaders and will always command market premium.

  • West, South and North are areas which have done well, while in East demand of cement has fallen as housing as seen a degrowth due to rains and Covid.

  • Coal and Petcock prices nearly doubled in Q2FY22resulting in energy cost rise by 17%.The resulting impact on the company’s operations were partly offset by reduction in power consumption and continuing focus on operational efficiencies. The company expect to commence mining operations at its Bicharpur coal block situated in Madhya Pradesh, during Q3FY22 which will help in reducing the dependence on coal purchases.

  • Management is quite confident of weathering the storm of increase in price of raw material with its sustainable efficienc

  • y improvement programs, accompanied by increase in selling price to absorb the increase in costs.

  • Management said fuel cost is going to increase by $ 10 in third quarter and this is going to be offset by price increase and management feels they are going to maintain there last year EBITDA margin.

  • Management feels they are going to have 6-8% volume growth in next quarter as demand is very strong in housing sector. They have already increase price by ₹10-15 per bag in different parts and which has not impacted demand and expect further rise in prices in coming days.

 OUTLOOK 

Ultratech cement reported a muted set of result which was below the street expectation revenue came in at ₹ 12016 compared   to ₹ 10387 last year and PAT came in at ₹1313 compared to ₹1166 crore last year. Ultratech’s 2QFY22 EBITDA at ₹27.15bn (+1% YoY) was near estimates (INR28.1bn) as higher than expected cost   inflation/overhead costs offset the benefit of better realisation and higher Other operating Income. For India operations, EBITDA/T (India Ops) was at ₹1320 vs street expectation of ₹ 1350 down INR270/T QoQ, lower INR60/T YoY. In this quarter, volumes remained flat QoQ, up 7% YoY; Pricing fell 2-3% QoQ. During the call, management indicated of improving demand with receding monsoons; ultratech has taken INR10-15/bag price hikes effective early Oct and management feels rising costs would be compensated by increase in prices over coming days; Domestic Coal (17% of fuel mix) availability is impacted and company will switch to International Coal/Petcock for fuel; Cost are expected to remain high amid soaring fuel prices – could see a INR200/t QoQ cost impact in 3Q and higher in 4QFY22/1QFY23.  Targeted 19.5MMT expansion is on track and is expected to be completed by FY23 end taking total capacity to 136.25MMT capacity.We expect Cement demand to remain strong, led by the government’s thrust on Infrastructure development and recent improvement in housing demand. Ultratech Cement is in a strong position to gain market share, led by its strong distribution network A strong pipeline of expansion projects and scope for improvement in utilization of existing capacities offers strong growth visibility but cost inflation is going to have a negative impact on margin as coal and fuel pricing are still rising in 3Q and 4Q.At the CMP of ₹7489, Ultratech is trading at PE multiple of 37x. Valuing the company at 34x FY23E EPS, we recommend Hold on Ultratech at CMP of for the Target Price of ₹ 7820.

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